Does Time Frame of IPO Proceeds Predict Survival of Firms? Evidence from the Malaysian Market

Siti Sarah Alyasa-Gan, Norliza Che-Yahya and Rand Kwong Yew Low

Journal of Emerging Market Finance, 2023, vol. 22, issue 4, 359-381

Abstract: Initial public offering (IPO) information disclosures such as the IPO proceeds’ strategic uses and the time frame have the potential to signal the listing firms’ post-IPO survival. We investigate the impact of IPO proceeds on 423 firms’ ability to maintain survival in business in Malaysia from 2000 to 2014. With a median survival span of approximately 104 months, our examination of survival data reveals that more than 40% of the firms in our sample had trouble surviving after their seventh year of listing. Our findings indicate that the share of IPO proceeds and the firms’ time horizon may be used to forecast whether or not they will survive, with meeting financial obligations serving as the primary motivating factor. A major fraction of IPO proceeds used for growth motives and financial obligations lead to shorter survival, while a longer time frame to meet the obligations leads to longer post-IPO survival. Our findings offer empirical support for regulators to safeguard investors’ interests and enhance firms’ survival in an environment with developing markets; information disclosure requirements include both the use of IPO proceeds and the time frame for its utilization.

Keywords: Emerging markets; initial public offerings; IPO proceeds utilization; Malaysia; survival analysis; time frame of proceeds (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:22:y:2023:i:4:p:359-381

DOI: 10.1177/09726527231178086

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