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Intended use of proceeds and post-IPO performance

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  • Amor, Salma Ben
  • Kooli, Maher

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.

Suggested Citation

  • Amor, Salma Ben & Kooli, Maher, 2017. "Intended use of proceeds and post-IPO performance," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 168-181.
    • Handle: RePEc:eee:quaeco:v:65:y:2017:i:c:p:168-181
    DOI: 10.1016/j.qref.2016.09.001
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    Cited by:

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    3. Fan, Pengda, 2019. "Debt retirement at IPO and firm growth," Journal of Economics and Business, Elsevier, vol. 101(C), pages 1-16.
    4. Ranganathan, Kavitha & Veeraraghavan, Madhu, 2023. "Pre-and-aftermarket IPO underpricing: Does use of proceeds disclosure matter?," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(3).
    5. Øyna, Stine & Almor, Tamar & Elango, B. & Tarba, Shlomo Y., 2018. "Maturing born globals and their acquisitive behaviour," International Business Review, Elsevier, vol. 27(3), pages 714-725.

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    More about this item

    Keywords

    Initial public offerings; Use of proceeds; Long-run performance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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