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Financial Statement Analysis to Determine IPO Readiness: Evidence from Georgian State-owned Joint Stock Companies

Author

Listed:
  • Ioseb Mamukelashvili

    (JSC Partnership Fund)

  • Elene Kharabadze

    (Ivane Javakhishvili Tbilisi State University)

Abstract

This paper analyzes financial statements of Georgia?s two of the largest state-owned joint stock companies (JSC), Georgian Railway and Georgian Oil and Gas Corporation to determine their readiness for Initial Public Offering (IPO). The above-mentioned firms represent 21% of the country?s JSC population by turnover and their IPO success index incorporates liquidity, profitability and capital and asset ratios. Series of tests illustrate that liquidity is one of the biggest determinants of IPO success with a 74% influence on the index. Liquidity also improves Return on Capital Employed by 53% and Return on Assets by 47.5%. Furthermore, we conclude that Return on Assets improves firms? chances of successful IPO by 31%. Consistent with our previous research, we believe that protection of minority shareholders? interests is crucial to the development of securities exchange and suggest specific legislative changes to that effect. We also suggest using constant currency financial reporting to eliminate the effects of currency fluctuations in short-term period.

Suggested Citation

  • Ioseb Mamukelashvili & Elene Kharabadze, 2017. "Financial Statement Analysis to Determine IPO Readiness: Evidence from Georgian State-owned Joint Stock Companies," Proceedings of Business and Management Conferences 5207514, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:ibmpro:5207514
    as

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    References listed on IDEAS

    as
    1. Dr. Elene Kharabadze & Ioseb Mamukelashvili, 2016. "The Development of Financial Reporting and Auditing Standards throughout the World: Importance of Institutions," Journal of Business & Management (COES&RJ-JBM), , vol. 4(3), pages 130-139, July.
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    4. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
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    6. Dr. Elene Kharabadze & Ioseb Mamukelashvili, 2016. "The Development of Financial Reporting and Auditing Standards throughout the World: Importance of Institutions," Journal of Business & Management (COES&RJ-JBM), , vol. 4(3), pages 130-139, July.
    7. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial Statement Analysis; Initial Public Offering; State-owned Joint Stock Companies; Constant Currency Financial Reporting; Protection of Minority Shareholders? Interests; Liquidity; Accounting Standards;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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