Survival of the Malaysian initial public offerings (original) (raw)
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International Journal of Academic Research in Economics and Management Sciences, 2021
This study aims to examine the survivability of IPO companies in the Malaysian market. The importance of this study goes consistent with Bursa Malaysia's initiatives in establishing the Practice Notes and Guidance Notes frameworks in elongating the survivability of IPO companies. Responding to the urge, this study examines the survival rate of 527 IPO companies listed in Bursa Malaysia from January 2000 to December 2014 (to observe companies' survival until early August 2021) using the Kaplan-Meier (K-M) survival analysis model. This study reports the survival rate of IPO companies in Malaysia to be at 62.81 percent after five years of listing and 56.91 percent after seven years of listing. Past studies have reported a higher survival rate of IPO companies in the Malaysian market. However, the survival rate of IPO companies should vary according to the definition a study adopts in segregating between surviving and non-surviving companies. Further investigation of the K-M log-rank test shows that the survival rate of companies differs according to their listing years, sectors and markets. Comparison between the survival rate of the Main Market and ACE Market reveals that over the seven years post-IPO, companies listed in the Main Market have a 7.55 percent higher survival rate than companies listed in the ACE Market over the seven years of the observation period. As such, it is suggestable that future researchers further examine the contributable factors for IPO companies to survive longer post-IPO using other survival analysis methods (semi-parametric or parametric).
The Long-Term Performance of Initial Public Offerings: Evidence from Bursa Malaysia
Journal of Applied Economics and Business Research, 2014
This paper investigates long-term (six-month, one-year, two-year, and three-year) returns of IPOs listed on the Bursa Malaysia (BM) in order to provide a more recent case of performance of IPOs in Malaysia. A total number of 166 firms listed and traded on the Bursa Malaysia (BM) for a period of three years starting from 2004 to 2007 were thoroughly analyzed in this paper. The findings of this paper shows that the average market-adjusted return for the six-month, one-year, two-year, and three-year after listing are -5.2%, -10.8%, -21.4%, and -32.8%, though they are not statistically significant. The regression models for the six-month return consist of market volatilities, book value to market value ratio, underwriter reputation, operating history of a company prior to going public, gross proceeds, total assets of a company prior to going public or size variable, hot or cold market period, industries, and first-day returns as an additional independent variable. The models for the lon...
Operating performance of Malaysian initial public offerings
2013
This paper examines the operating performance of Malaysian Initial Public Offerings. Overall, we find that the operating performance declines after being listed in stock market. The listing causes a decline in profitability, sales growth and efficiency, and shows significant increase for leverage and sales volume. We then explore the relationship between IPOs'underpricing and post-issue operating performance and find the underpricing is insignificant in explaining the post-issue operating performance. Using a crosssectional analysis, we examine the relation between post-issue performance and the long-run market returns of Malaysian IPOs. The results show that investors evaluate the fundamentals of the firms by studying the accounting measures when they make their investment decisions.
2013
This study tracks IPOs from the time of their entry into the public domain up to at least six years post-listing. In the first part of this study, the post-listing performance of these firms relative to that of a set of control firms in event and calendar time is evaluated, using a fresh sample of 746 IPOs in the UK market over the period 1999-2006 and stepwise matching algorithms that select the matching firms from the general population on the basis of key firm risk factors that includes three new factors – pre-IPO performance, turnover growth and earnings yield – employing a refined matching technique and a battery of methods. Given that the majority of the studies in the literature find that IPOs are poor investments in the long-term, the findings in the first part suggest firstly, that investing in IPOs beyond the immediate after-market may not be a bad trading strategy since the relative after-market performance is dependent on the proportions in which the stocks are stacked i...
An Assessment of the Performance of Initial Public Offering (IPOs) in Malaysia
Research Journal of Finance and Accounting, 2015
Initial Public Offerings (IPOs) are largely underpriced in short term. This underpricing phenomenon has been well recognized in nearly all the stock markets in the world. Recent evidence suggests that underpricing is higher in a buoyant stock market. Most studies in the field of IPO have only focused on developed countries. Little is known about underpricing and it is not clear what factors influencing underpricing in developing country. Unlike in developed markets, this study analyzed the existence of underpricing issue of Malaysian IPOs listed in Bursa Malaysia from 2000 to 2008. This study then examines the impact of different use types of proceeds on IPO underpricing. In particular, four main influencing factors of underpricing including IPO size, market volatility, underwriter status and reciprocal of IPO price are investigated. A sample of 102 IPOs was selected and analyzed. Results show that the average market adjusted initial return is 9.4%. A regression analysis was conducted which resulted in positive impact of IPO size, market volatility, underwriter status and reciprocal of IPO price on underpricing. Therefore, this study provides a new perspective to analyze the underpricing problem by focusing on the multiple elements.
Intended Use of IPO Proceeds and Survival of Listed Companies in Malaysia
Journal of Risk and Financial Management, 2022
In the context of Malaysian companies’ survival, the potential role of intended use of proceeds as an influential factor remains unfamiliar. This study examines the link between the intended use of IPO proceeds and the survival of 423 Malaysian listed companies over the period of 2000–2014. This study distinguishes the use of IPO proceeds into three segregations: growth opportunities, debt repayment, and working capital. Employing the Accelerated Failure Time (AFT) survival model, the overall evidence shows a statistically significant effect of the intended use of IPO proceeds for growth opportunities and debt repayment on companies’ post-IPO survival. Furthermore, company survival was found to be consistently improved when they allocated less than 50% of their IPO proceeds, regardless of the purposes (growth, repay debt or general). These results highlight the importance of the intended use of IPO proceeds on the survival of newly listed companies, and provide insights for policyma...
Performance of Malaysian IPOs and Impact of Return Determinants
This study has examined the IPO performance in Malaysia from 2007 to 2010. Results show that under-pricing exists in the first day of trading during the particular period, but results show that the degree of under-pricing is dramatically decreased in comparison with what is shown in previous studies. Empirical findings also show that none of return determinants including Age, size, total unit offered, offering price and KLCI index movement are able to affect on IPO initial return. It shows that Malaysian IPOs follow anarchy during this period while their performances are not predictable by return determinants.
Does Size Matter for IPO Survival? Empirical Evidence from India
Vision: The Journal of Business Perspective, 2018
This article examines the effect of size of new issues on their survival profile in the aftermarket. The relationship between the probability of delisting and the time duration of initial public offerings (IPOs) on Bombay Stock Exchange (BSE) is tested using logistic regression and parametric survival analysis models. The models take a range of information concerning offering, market and corporate specific characteristics as well to explore the outcome of IPOs on the trading exchange. The analysis of Kaplan–Meier curves provides insight about how size matters in determining the survival and hazard trend of IPO in the aftermarket. Overall, the study reveals that issues with large size exhibits more market confidence as well as ability to withstand the rough market situations in the aftermarket, and hence, they survive longer in the market. The analysis of other variables shows a positive influence of age, lead manager’s reputation and IPO demand, whereas negative influence of risk, l...
Journal of Emerging Market Finance
This study examines the long-run performance of the initial public offerings (IPOs) listed in the Malaysian main and alternative ‘Access, Certainty and Efficiency’ (ACE) markets at the economic and sectorial levels. Using event- and calendar-time study methods and monthly data from January 2000 to December 2011, we provide novel evidence on the existence of under performance anomaly in the Malaysian markets and more intensely in the ACE markets. We demonstrate robust evidence on the distinction in sector-specific characteristics from the aggregate market characteristics. While the consumer products and industrial sectors dominate the overall underperformance, the construction, property and technology sectors significantly overperform. The findings are robust to a wide range of other sensitivity checks including parametric and non-parametric tests. JEL Classification: G14, G15, G30, G34, G32, G38
The Long Run Share Price Performance of Malaysian Initial Public Offerings (IPOs)
Journal of Business Finance & Accounting, 2007
This paper investigates the long run share price performance of 454 Malaysian IPOs during the period 1990 to 2000. In contrast with developed markets, significant over performance is found for equally-weighted event time CARs and buy-and-hold returns using two market benchmarks, though not for value-weighted returns or using a matched company benchmark. The significant abnormal performance also disappears under the calendar-time approach using the Fama-French (1993) three factor model. While the long run performance of Main and Second Board IPOs does not differ, the year of listing, issue proceeds and initial returns are found to be performance-related. 78 1 Companies on the Second Board comprise 69% of the sample. Companies listed on the Second Board are typically (but not always) smaller than those listed on the Main Board of the KLSE. As of January 2001, companies seeking a listing on the Second Board must have a minimum issued and paid-up capital of RM40 million comprising ordinary shares of RM1.00 each. For the Main Board, a minimum paid-up capital of RM60 million is required (Listing Requirements of the KLSE, Chapter 3: Section 3.04). 2 The KLSE was renamed to Bursa Malaysia effective from 1 May, 2004. Since the analysis of this study covers the period from 1990 to 2003 inclusive, the term KLSE is used throughout the paper. 3 An event-time approach is adopted when performance is measured relative to the date of the IPO. A calendar-time approach is adopted when, for each calendar month, the returns are obtained for each sample company which had an IPO event in the previous three years. The portfolios of these companies are re-formed every month and the portfolio return in that month is then calculated. As a result, a time-series of portfolio returns is available to run the Fama-French three-factor model.