Intended use of proceeds and post-IPO performance

Salma Ben Amor and Maher Kooli

The Quarterly Review of Economics and Finance, 2017, vol. 65, issue C, 168-181

Abstract: We hand collected data from the IPO prospectus on the primary use of proceeds of IPO firms and examine whether it contains useful information about the firm's future performance and survival profile. Specifically, we cover the 1996–2012 period and examine four categories of use of proceeds: debt repayment, investment, marketing and sales promotion, and general corporate purposes. We find that IPOs declaring investment plans as the primary use of proceeds exhibit insignificant average abnormal returns in the three years following the IPO, while IPOs that state debt repayment as the primary use of proceeds are the highest underperformers. Our results confirm the role that the primary use of proceeds plays in explaining the timing motive of IPO firms.

Keywords: Initial public offerings; Use of proceeds; Long-run performance (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:65:y:2017:i:c:p:168-181

DOI: 10.1016/j.qref.2016.09.001

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