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What determines the survival of internet IPOs?

Author

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  • Tjalling van der Goot
  • Noud van Giersbergen
  • Michiel Botman

Abstract

This article examines whether the variables that are significant in noninternet initial public offering (IPOs) play a similar role for internet IPOs. To this end, we analyse the determinants of survival of internet firms that have gone public at the NASDAQ stock exchange from December 1996 through February 2001. Financial and nonfinancial data published in the IPO prospectuses are examined. For our analysis, we use the semiparametric Cox proportional hazard model and estimate the effect of these variables on the trading (survival) time using the parametric Log-logistic survival model. It appears that the average operating history of internet IPOs is remarkably small compared to noninternet IPOs, namely 2.4 and 10 years, respectively. Furthermore, we find that the average number of risk factors for internet IPOs is four times higher than the number reported for noninternet IPOs. The results of the parametric analysis correspond to the semiparametric results. Our findings hold under a number of different model specifications and robustness checks. The sensitivity analysis in the Log-logistic model reveals that the greatest positive effect on the survival time comes from investor demand followed by operational cash flow over liabilities. The expected survival time is shortened mostly by IPO market level, followed by valuation uncertainty.

Suggested Citation

  • Tjalling van der Goot & Noud van Giersbergen & Michiel Botman, 2009. "What determines the survival of internet IPOs?," Applied Economics, Taylor & Francis Journals, vol. 41(5), pages 547-561.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:5:p:547-561
    DOI: 10.1080/00036840601007369
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    Cited by:

    1. Wagner, S. & Cockburn, I., 2010. "Patents and the survival of Internet-related IPOs," Research Policy, Elsevier, vol. 39(2), pages 214-228, March.
    2. Iftikhar Ahmad & Izlin Ismail & Shahrin Saaid Shaharuddin, 2021. "Predictive Role of Ex Ante Strategic Firm Characteristics for Sustainable Initial Public Offering (IPO) Survival," Sustainability, MDPI, vol. 13(14), pages 1-26, July.
    3. Aleksandar Bradic, 2012. "The Role of Social Feedback in Financing of Technology Ventures," Papers 1301.2196, arXiv.org.
    4. Muhammad Zubair Mumtaz & Zachary Alexander Smith, 2021. "Analyzing the duration of IPOs from offering to listing using the Cox proportional hazards model," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 20(1), pages 5-43, January.
    5. Henson, James, 2014. "The Survival of Nonprofits in the United States," MPRA Paper 59494, University Library of Munich, Germany.
    6. Sophie Pommet, 2011. "The survival of venture capital backed companies : an analysis of the French case," Working Papers halshs-00720927, HAL.
    7. Sophie Pommet, 2012. "The Survival of Venture Capital Backed Companies: An Analysis of the French Case," GREDEG Working Papers 2012-14, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    8. Cressy, Robert & Farag, Hisham, 2014. "Stairway to heaven or gateway to hell? A competing risks analysis of delistings from Hong Kong's Growth Enterprise Market," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 195-205.

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