Cash shortfalls in IPO firms

Lei Liu, Gady Jacoby, Xiaoping Song and Steven Xiaofan Zheng

Finance Research Letters, 2023, vol. 52, issue C

Abstract: We find that most IPO firms will run out of cash soon if they did not receive proceeds from IPOs. The cash shortfalls are not caused by increases in capital expenditure, R&D, M&A, or debt repayment and persist during the 5 years after IPO. Negative net cash flows help explain the persistent cash shortfalls. These results are consistent with the funding horizon theory. IPO firms with more initial cash shortfalls also have lower cash flows in the next 5 years, suggesting that initial cash shortfalls can be used to predict the future operating performance of IPO firms.

Keywords: Cash shortfalls; IPO; Cash flows (search for similar items in EconPapers)
JEL-codes: G14 G32 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322006961

DOI: 10.1016/j.frl.2022.103520

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