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The purpose of this paper is to examine how long a real estate investment trust (REIT) initial public offer (IPO) survives until a merger occurs, and to determine the impact of different firm characteristics that exist at the time of the IPO on that survival in the aftermarket period.

The authors apply an accelerated failure time (AFT) duration model to determine how long the IPO will survive until merger occurs.

The results indicate that the time from the IPO to an eventual merger increases with size, the age of the REIT at IPO, and the percentage of institutional ownership. In contrast, the authors find that the time until merger decreases with increased market performance prior to the time of the offering and with the number of additional IPOs occurring at the time of the IPO.

There is a growing body of research that suggests that IPOs might be motivated by subsequent mergers. An understanding of those characteristics that effect the time until a merger occurs these relationships will enable market participants and capital providers to make better decisions about proceeding with, or evaluating, a REIT IPO.

There is a significant body of research on IPOs in general; however, the findings of this research vary depending upon the industry being examined. Further, there are a limited number of papers on IPO aftermarket survival. This is the only paper on REIT IPO aftermarket survival.

Indian IPO (Initial Public Offer) market has witnessed huge fluctuations in the post-SEBI (Securities Exchange Board of India) era. Although several new issues have entered the market during this period, yet only a few of them have managed to survive well. A lot of researchers have examined the aftermarket performance of such IPOs; however the phenomenon of IPO’s survival has remained a neglected issue in India. Hence, the need arises to investigate the factors behind the success and failure of new issues in the market. The present study attempts to critically analyze the journey of IPOs in terms of their survival in the aftermarket.

This study examines the survival profile of 3374 IPOs in India from 1992-2011 across the issue, market, and company specific variables using ‘Logistic Regression’ and ‘Survival Analysis’ methodologies.

The study reveals that IPOs of older firms, backed by reputed lead managers and with high demand are more likely to survive longer, whereas IPOs with high initial returns, higher risk and more delay in listing are less likely to survive longer in the market. Further, it has been found that increase in the size of IPOs accelerates their survival duration whereas high market level as well as high IPO activity decelerates such duration on the exchange. The survival probability and the duration of IPOs are negatively affected in case of agriculture, administration and support activities sectors, whereas positively affected in case of mining, construction, wholesale and retail, accommodation, information and communication, finance and insurance, and others sectors.

The findings of this study have fruitful implication for the issuers, investors, and the regulators as they can evaluate the future prospects of IPOs and can take the rational decisions accordingly.

The study provides new evidences of the influence of certain factors on the subsequent survival of newly listed issues which has not been extensively explored in India.

The purpose of this paper is to identify the extent to which the company's post- initial public offering (IPO) outcome varies, along with the determinants of the post-IPO outcomes.

The authors use Cox proportional hazards models to examine what determines the company's post-IPO transition to one of the classified outcomes, delisting, acquisition due to strong performance, and acquisition due to weak performance. The authors develop models taking in a range of information concerning pre-IPO characteristics, offering characteristics, financial indicators, company specifics, industry features, and corporate ownership and governance.

Delisting is predominantly influenced by the company’ pre-IPO operating performance, as well as financial indicators and governance structure at the time of the IPO. Sound governance structure and good financial standing of the company aid it to achieve its goal. Mergers and acquisitions (M&As) of both forms are distinguished most significantly by ownership structure and industry features, which is consonant with the position that M&As are majorly motivated by social concerns and corporate control considerations. Centrally, corporate evolution is jointly shaped by market force and state control.

The findings can inform public policy decisions. There is a case for gradual introduction of institutional changes which facilitate, regulate, and monitor orderly market operations in line with the market mechanism and sound corporate governance.

The study is among the first efforts to examine what determines the company's transition to one of the post-IPO states following the IPO in China's stock market.

The purpose of this paper is to investigate the effect of the control-ownership wedge of controlling shareholders (excess control) on the survival of French initial public offerings (IPOs).

This paper studies a large sample of 434 French IPOs. The empirical analysis uses the Cox proportional hazard and accelerated-failure-time models. Data are manually gathered from IPO prospectuses.

The findings support a positive relation between the control-ownership wedge and IPO survival time, indicating that survival is more likely in firms with high excess control levels. This result is consistent with the view that controlling shareholders with a large control-ownership wedge have incentives to preserve their private benefits of control by increasing firm survival chances. The findings also show that older IPOs are more likely to survive, while riskier and underpriced IPOs are more likely to delist.

The results provide a better understanding of the role of excess control in IPO survival. They also enrich the debate on the efficiency of the one-share-one-vote rule.

The research provides new insights into the role of agency conflicts in IPO survivability. In particular, it explores the effect of dominant shareholders with a control-ownership wedge on survival time.

The purpose of this paper is to analyze the wealth effect of involuntary delisting and investigate insider opportunism and the role of corporate governance, liquidity and legal environment in involuntary delisting in Japan’s stock market.

The authors use a sample of 136 involuntarily delisted firms in Japan’s stock markets between 2002 and 2012. The authors examine ownership changes of inside shareholders prior to delisting and estimate regression models for the wealth effect of involuntary delisting.

Involuntary delisting is highly disruptive in Japan, and limited liquidity of delisted stocks appears to be an important cause. However, the ownership reduction of inside shareholders before delisting is limited, totaling 2–3 percent. For delisted firms with an insider bank, the decrease in share price leading up to a delisting announcement is much less, while the decrease in share price upon a delisting announcement is far greater.

The study investigates involuntary delisting in regard to the opportunistic behavior of inside shareholders and the role of institutional environment in Japan’s stock market. Insiders, especially insider banks, maintain ownership in a distressful context leading to the forcible delisting of a distressed firm. The authors find some evidence that suggests that the market believes the insider bank will try to prevent the ailing firm’s insolvency. The findings are consistent with the implicit relational contracts that characterize Japanese firms.

The purpose of this paper is to examine the determinants of involuntary delisting rate for the Egyptian initial public offerings (IPOs) issued over the period 1992-2009.

A definition of survival time that considers the date when the new Egyptian listing rules were enforced to track delisting status for each IPO firm for five survival years is relied on. Binary logit regression analysis is used to identify these determinants. Total sample is divided into two subsamples: the first subsample covers the period from 1992 to 2004. It is used to estimate the logit equations and to predict delisting status of firms included in the second subsample, which covers the period from 2005 to 2009.

The probability of involuntary delisting decreases significantly with the increase in firm size, institutional ownership, assets growth rate, operating efficiency, offering size, initial returns and insider ownership. However, it increases significantly in IPO firms with high financial leverage. Based on the estimated logit regression equations, the status of the six firms included in the second subsample are correctly predicted.

The results provide several implications for investors, issuing firms and setters of listing rules.

This study uses new variables, such as firm type, institutional ownership and listing variables. In addition, several theories are tested and supported.

The study intends to shed lights on whether the risk factors disclosed in the initial public offering (IPO) prospectus in Malaysia are able to reflect the actual risks of stocks once they are traded on the exchange. In other words, the purpose of this paper is to explore whether prospective investors will be able to benefit, in terms of the more accurate risk information, from the risk disclosures in the IPO-prospectus.

Using data obtained from 118 IPO prospectuses of Malaysian companies that issued shares on Bursa Malaysia in the period from 2009 to 2016, the authors investigated whether the “risk factor” section in the IPO prospectuses provides sufficient risk-relevant information to investors. To determine whether companies disclose risk-relevant information, a detailed content analysis of the risk sections was carried out to obtain an aggregate measure of risk disclosure.

The findings revealed that the aggregate measures of risk extracted from these texts did not successfully predict the following outcomes: the volatility of companies’ future stock prices, the sensitivity of future stock prices to market-wide fluctuations and the severe declines in future stock prices.

As indicated by the findings, the authors, therefore, deduce that the IPO prospectuses of Malaysian companies do not provide sufficient risk-relevant information in the risk factor section. The findings imply that overall the management of Malaysian companies would neither be able nor willing to disclose the right and relevant information to the public via IPO prospectus.

Many corporate risk disclosure studies focus primarily on the disclosures of annual reports of companies. The study intends to fill the gap by focusing on the risk disclosure in the IPO-prospectus. Risk disclosures in IPO-prospectus are farmore extensive than annual reports and, therefore, provide a richness of information that will not be available in the annual reports.

Building on new venture internationalization, agency, and signaling theories, the purpose of this paper is to examine the relationship between the level of firm internationalization and initial public offering (IPO) performance. Further, the purpose of this paper is to evaluate the moderating role of firm ownership structure on this relationship.

The data set for this study is composed of 298 firms that made IPOs in years 1997, 1998, 2001 and 2002 in the US stock exchanges. The study utilizes hierarchical ordinary least squares (OLS) regression analyses to test its hypotheses. The model developed in this study identified IPO firm ownership structure as the moderator variable, IPO firm internationalization as the predictor variable, and underpricing as the criterion variable. This paper utilized robust regression modeling analyses available in Stata to analyze the data and test their hypotheses.

Results based on data collected from 298 IPO firms suggest that firm internationalization has a positive impact on IPO underpricing. Results also report that the relationship between firm internationalization and IPO underpricing is moderated by CEO and blockholder ownership, with the relationship being stronger in IPO firms with higher levels of CEO and blockholder ownership.

The current paper examines the impact of an IPO firm's internationalization prior to its going public on the subsequent performance of the IPO. In doing so, this paper seeks to help in resolving some of the apparent theoretical and empirical contradictions identified in literature. In addition, the introduction of IPO ownership structure as a moderator variable in the relationship between IPO firm internationalization and performance extends the applicability of agency theory to IPO firms and ensures a multi‐theoretic, finer‐grained conceptualization of this relationship.

One of the key elements of survival models is that they enable the researcher to determine whether the length of time an individual (or economic entity) spends in a particular state affects the probability of exiting that state. Natural applications in economics and finance include the analysis of unemployment spells, corporate bankruptcies and mortgage pre‐payments. The distinguishing feature of most applications is the definitive event that marks the transition from the origin to the transition state. We believe that limiting the use of survival analysis to applications in which the event duration appears to be ‘naturally’ available is an unnecessary constraint. For example, the date of emergence from Chapter 11 bankruptcy protection is a subjective management decision and the true event duration, though treated as definitive, is in reality quite ambiguous. We propose that survival models can and should be extended to analyze researcher‐defined events such as the length of time a stock takes to reach a preset price target. We illustrate our point with an examination of IPO aftermarket behavior.

After studying this case, students must be able to explain the rationale for going public; identify the type of markets available for listing a company on Bursa Malaysia and explain the listing process; and analyse pre-IPO financial performance using trend analysis, comparative analysis and common-size analysis.

Uniutama Education and Consultancy Sdn. Bhd. (UECSB) in Universiti Utara Malaysia (UUM) was a company with strong financial performance and growth opportunities. In 2020, UECSB was planning for an initial public offering (IPO), whereby the company could offer shares to the public. This would allow UECSB to raise capital from public investors, and increase UECSB’s credibility and exposure. Therefore, Halim, who was the General Manager of UECSB, needed to decide whether or not UECSB should go for an IPO.

This case is more appropriate for final-year undergraduate students, particularly those majoring in Finance. This case is also suitable for postgraduate students, especially those enrolling in Master of Business Administration (MBA), Master of Business Management (MBM) and Doctor of Business Administration (DBA) programmes, and Executive Education programmes in Management.

Teaching notes are available for educators only.

CSS 1: Accounting and Finance.