Malaysian IPO performances: the effect of growth opportunities and public issue / Siti Suhaila Abdul Rahman

This study examines the influence of growth opportunity of a firm on IPO performance in the immediate and long-term aftermarket. This study also examines the interaction effect of IPO issued through public issue type on the relationship between growth opportunity of a firm and IPO performance. The declining pattern on the mean initial returns and the negative long-term aftermarket returns of Malaysian IPOs alarmed investors to wisely choose IPO firms for them to participate and produce their desirable returns. This study proposes that growth opportunity of a firm should significantly and positively influence the immediate aftermarket and long-term aftermarket performance of IPOs as such potentially assist investors to achieve for their desired profits. Therefore, this study is conducted to achieve for the following objectives: 1) To investigate the influence of growth opportunities of firms on the immediate aftermarket performance of IPOs ; 2) To investigate the influence of growth opportunities of firms on the long-term aftermarket performance of IPOs; 3) To investigate the interacting effect of public issues on the main relationship between growth opportunities of firms and both immediate aftermarket and long-term aftermarket performance of IPOs; 4) To investigate the influence of other independents variables (e.g., demand of IPOs, offer size, underwriter reputation, firm size and market condition) on IPO performance in both immediate and long-term aftermarket. This study employs cross-sectional multiple regression models to test for all of its hypotheses. Employing 403 IPOs listed in Main Market and ACE Market of Bursa Malaysia from January 2000 to December 2014, this study reveals that growth opportunity of a firm that is measured by the percentage of IPO proceeds allocated to growth activities has a positive and significant relationship to IPO performance in both the immediate and long-term aftermarket. Moreover, despite the insignificant interaction effect of public issue ratio on the relationship between growth opportunity of a firm and IPO performance in both periods, this study reveals that the interaction product between growth opportunity of a firm and public issue ratio strengthens the influence of growth opportunities of firms on performance of IPOs.