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The role of internationalization on the IPO performance of service firms: Examination of initial returns, long-run returns, and survivability

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  • Ozdemir, Ozgur
  • Upneja, Arun

Abstract

This study examines the effect of internationalization on the initial and long-run IPO performance of service firms. The study discusses that pre-IPO internationalization of service firms contributes to the explanation of long-discussed IPO underpricing phenomenon, and underperformance of IPOs in the long-run. Sample of the study includes 1822 IPO issues conducted by US service firms between 1980 and 2009. Findings of the study suggest that international service firms leave less money on table in their IPOs compared to domestic service firms by providing significantly lower first day returns to their investors on their first day of public trading. Moreover, our findings provide evidence that 3-year cumulative abnormal returns and 3-year buy-and-hold returns of international service firms are significantly higher than domestic service firms, and international service firms outperform domestic service firms in both operating return on assets and operating cash flows in the post-IPO period. Lastly, the study documents that survival rate of service firms subsequent to an IPO issue increases with pre-IPO internationalization.

Suggested Citation

  • Ozdemir, Ozgur & Upneja, Arun, 2016. "The role of internationalization on the IPO performance of service firms: Examination of initial returns, long-run returns, and survivability," International Business Review, Elsevier, vol. 25(5), pages 997-1009.
    • Handle: RePEc:eee:iburev:v:25:y:2016:i:5:p:997-1009
    DOI: 10.1016/j.ibusrev.2016.01.009
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    4. Chen, Li-Yu & Lai, Jung-Ho & Chang, Shao-Chi, 2022. "Strategic networks, certification, and initial public offerings," International Review of Financial Analysis, Elsevier, vol. 83(C).
    5. Yan, Jiaju & Williams, D.W., 2021. "Timing is everything? Curvilinear effects of age at entry on new firm growth and survival and the moderating effect of IPO performance," Journal of Business Venturing, Elsevier, vol. 36(5).
    6. Apostolos Dasilas & Chris Grose & Michael A. Talias, 2017. "Investigating the valuation effects of reverse takeovers: evidence from Europe," Review of Quantitative Finance and Accounting, Springer, vol. 49(4), pages 973-1004, November.
    7. Nguyen Van Tan & Ninh Thi Trang, 2023. "The long-run performance of initial public offerings: evidence from a transition economy," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 13(5), pages 574-591.
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    9. Nugroho Sasikirono & Sumiati Sumiati & Nur Khusniyah Indrawati, 2018. "Underpricing and long-term market performance of initial public offerings in Indonesia: A quantile regression approach," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(1), pages 152-167, January.

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