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Why the Operating Performance of Post-IPO Firms Decreases: Evidence from China

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  • Hai Long

    (Business School, Wuchang University of Technology, Wuhan 430223, China
    International College, Krirk University, Bangkok 10220, Thailand)

  • Xiaochen Lin

    (International College, Krirk University, Bangkok 10220, Thailand)

  • Yu Chen

    (International College, Krirk University, Bangkok 10220, Thailand)

Abstract

Based on a database of 200 listed firms from the Growth Enterprise Market of China, this paper employs regression models to investigate the significance of IPO capital expenditure to firms’ operating performance. It suggests that a vast majority of pre-IPO money is spent on business development to promote operating performance in order to meet IPO requirements. After the IPO, most of the money is transferred to equity investments in order to increase the firms’ market value quickly, which leads to operating performance decline and deterioration.

Suggested Citation

  • Hai Long & Xiaochen Lin & Yu Chen, 2021. "Why the Operating Performance of Post-IPO Firms Decreases: Evidence from China," JRFM, MDPI, vol. 14(9), pages 1-15, September.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:9:p:424-:d:629564
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    References listed on IDEAS

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    Cited by:

    1. Hai Long & Jianzhi Zhao & Xiaochen Lin & Lanyong Liu, 2022. "Does Venture Capital Reputation Contribute to Pre-IPO Performance of Entrepreneurial Firms in the Chinese Context?," SAGE Open, , vol. 12(4), pages 21582440221, November.

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