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Article
Publication date: 10 April 2017

Sophie Pommet

The purpose of this paper is to analyze the impact of venture capital (VC) involvement on the survival rate of French initial public offerings (IPOs) during the period…

Abstract

Purpose

The purpose of this paper is to analyze the impact of venture capital (VC) involvement on the survival rate of French initial public offerings (IPOs) during the period 1996-2006. The paper examines the link between the survival rates of IPO companies, and several proxies for the quality of venture capitalist financing and monitoring.

Design/methodology/approach

To analyze the impact of the involvement of VC on both long and short run post-IPO survival, two methods are used: survival analysis (the Cox proportional hazard), and a logit model.

Findings

This paper shows that the quality of venture capitalist monitoring, measured by the duration of their investment before the IPO, is positively correlated with company survival rates. However, the author does not find the expected result when the author considers the experience of venture capitalists measured by their age.

Research limitations/implications

The findings are limited to a sample of VC-backed companies that went public.

Practical implications

The findings have implications for entrepreneurs. When analyzing the advantages and disadvantages linked to the presence of VC firms in the capital of their companies, entrepreneurs should consider that certain types of venture capitalists might be more or less able to be involved in the monitoring and value adding process.

Originality/value

To date, there is no comprehensive study on the French IPO market analyzing both long and short run post-IPO survival of VC-backed companies. This paper fills this gap.

Details

Managerial Finance, vol. 43 no. 4
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 2 March 2012

Fariss‐Terry Mousa and William Wales

This paper aims to explore the effects of entrepreneurial orientation (EO) on firm survival and examine whether founder chief executive officers (CEOs) are more effective…

Abstract

Purpose

This paper aims to explore the effects of entrepreneurial orientation (EO) on firm survival and examine whether founder chief executive officers (CEOs) are more effective than other types of managers at utilizing entrepreneurial orientation at initial public offerings (IPOs).

Design/methodology/approach

Using survival analysis the authors investigate the effects of EO on firm survival as well as the moderating role of founder CEOs.

Findings

The results suggest that EO increases post‐IPO survival. Further, founder‐CEOs moderate the EO‐survival relationship.

Originality/value

The paper shows that entrepreneurial orientation enhances long‐term survival in IPO firms. Survival is an important, though generally overlooked consideration in EO research. The paper also concludes that firms with founder CEOs are more likely to value and implement EO. Finally, the paper addresses calls for greater use of secondary measures of EO.

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Article
Publication date: 14 May 2018

Imen Derouiche, Syrine Sassi and Narjess Toumi

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…

Abstract

Purpose

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).

Design/methodology/approach

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.

Findings

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.

Practical implications

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.

Originality/value

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.

Details

Journal of Applied Accounting Research, vol. 19 no. 2
Type: Research Article
ISSN: 0967-5426

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Article
Publication date: 1 April 2005

Bharat A. Jain and Charles L. Martin Charles L. Martin Jr.

This study examines the issue of whether audit quality contracted by issuers at the time of going public is associated with post‐IPO survival. Survival analysis…

Abstract

This study examines the issue of whether audit quality contracted by issuers at the time of going public is associated with post‐IPO survival. Survival analysis methodology is applied to estimate the probability of post‐IPO time to failure as a function of audit quality. Through estimation of the Cox‐Proportional Hazards models, we find that audit quality is significantly related to post‐IPO time to failure both in isolation and in the presence of other covariates that influence firm survival. Further, the association between audit quality and post‐IPO survival is stronger when investment bank prestige is low.

Details

Review of Accounting and Finance, vol. 4 no. 4
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 28 June 2013

John C. Alexander, Ping Cheng, Ronald C. Rutherford and Thomas M. Springer

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…

Abstract

Purpose

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.

Design/methodology/approach

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

Findings

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.

Practical implications

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.

Originality/value

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.

Details

Managerial Finance, vol. 39 no. 8
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 10 November 2016

R. Greg Bell, Abdul A. Rasheed and Sri Beldona

To date there is little understanding of the factors that impact the survival of foreign IPOs after they list on US stock exchanges. In this study, we examine how foreign…

Abstract

To date there is little understanding of the factors that impact the survival of foreign IPOs after they list on US stock exchanges. In this study, we examine how foreign IPO survival is contingent on institutional factors associated with the firm’s home country. We also explore how corporate governance and organizational identity influence the survival of foreign IPOs in the United States. Results suggest that the US institutional environment supports foreign firms with more independent and professional leadership, and that knowledge-intense organizations have higher chances of long-term success after listing on US exchanges.

Details

Global Entrepreneurship: Past, Present & Future
Type: Book
ISBN: 978-1-78635-483-9

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Article
Publication date: 12 June 2017

Milos Vulanovic

The purpose of this paper is to study how institutional characteristics of specified purpose acquisition companies (SPACs) are related to their post-merger survival. SPACs…

Abstract

Purpose

The purpose of this paper is to study how institutional characteristics of specified purpose acquisition companies (SPACs) are related to their post-merger survival. SPACs are unique financial firms that conduct the initial public offering (IPO) with the sole purpose of using the proceeds to acquire another private company. The paper finds that institutional characteristics of SPACs are important in determining post-merger outcomes of new company, specifically when it comes to their survival/failure, i.e., increases in pre-merger commitment by SPAC stakeholders and initial positive market performance increase post-merger survival likelihood; on the contrary, mergers with higher transaction costs and focused on foreign companies exhibit increased likelihood of failure.

Design/methodology/approach

Using unique sample of companies conducting an IPO, namely, SPACs, with the sole purpose to execute an acquisition in the future date within limited time, this paper presents additional evidence on the survival and acquisition frequency of IPOs, and determinants of these choices.

Findings

Observing unique set of specified purpose companies, this paper documents that SPACs’ failure rate is at the level of 58.09 percent, higher than any previously reported failure rate in the post-IPO survival literature and comparable only to failure rates found by Hensler et al. (1997) at 55.10 percent for general companies. In addition, the paper documents similar findings to Bhabra and Pettway (2003) that prospectus and market characteristics of original companies have predictive power with respect to survival.

Originality/value

This study extends the literature on post-IPO survival in following ways. First, the paper documents survival rates for unique set of companies organized with the sole purpose to acquire another company. Second, the paper presents evidence on how institutional characteristics of SPAC determine their post-merged outcomes, specifically when it comes to their failures. Finally, paper contributes to the scant literature on SPACs providing new evidence on their post-merger outcomes and performance.

Details

Managerial Finance, vol. 43 no. 6
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 6 May 2014

Esam-Aldin M. Algebaly, Yusnidah Ibrahim and Nurwati A. Ahmad-Zaluki

– 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.

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Practical implications

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

Originality/value

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

Details

Review of Accounting and Finance, vol. 13 no. 2
Type: Research Article
ISSN: 1475-7702

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Book part
Publication date: 19 September 2014

Silvio Vismara and Andrea Signori

Innovation is a key driver of a firm’s ability to survive in the financial market. Previous studies typically consider a firm dead once its shares are delisted from the…

Abstract

Innovation is a key driver of a firm’s ability to survive in the financial market. Previous studies typically consider a firm dead once its shares are delisted from the stock exchange. Despite its negative connotation, delisting may be a strategic decision and therefore be a positive outcome for the company. We study how a firm’s innovative activity, in terms of R&D investments and number of patents, shapes its survival profile, taking into account the heterogeneous nature of delistings. Using a sample of high-tech small and medium enterprises (SMEs) going public in Europe during 1998–2003, we find that more innovative firms, both in terms of patents and R&D investments, have a higher probability to be taken over. However, while firms with a rich portfolio of patents are less likely to voluntarily delist, higher R&D investments increase a firm’s likelihood of being delisted due to compliance failure.

Details

Finance and Strategy
Type: Book
ISBN: 978-1-78350-493-0

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Article
Publication date: 1 April 2005

Marc J. LeClere

This special issue of the Review of Finance and Accounting presents six papers which use survival analysis as a research method to examine a wide range of research…

Abstract

This special issue of the Review of Finance and Accounting presents six papers which use survival analysis as a research method to examine a wide range of research questions in accounting, economics, and finance. Although researchers have increased their use of survival analysis as a research method in recent years, its presence in the methods ‘toolbox’ of these disciplines is not comparable to the physical sciences or other social sciences. Whereas survival analysis is routinely used in biomedicine, sociology, and engineering to study questions related to patient survival, marriage, and equipment failure, the use of survival analysis in economic‐based disciplines is not comparable to other disciplines. This issue was assembled in order to highlight the use of survival analysis in economics‐based disciplines with the express purpose of encouraging its use as a research method to examine a wider range of research issues. The papers assembled in this issue are written by authors who have previously demonstrated an interest in survival analysis.

Details

Review of Accounting and Finance, vol. 4 no. 4
Type: Research Article
ISSN: 1475-7702

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