Intended Use of Proceeds and the Post-Issue Operating Performance of IPO Firms: A Quantile Regression Approach

Abstract

This paper investigates the link between intended use of proceeds and the decline in post-issue operating performance of IPO firms. After taking into account special features of the compositional data containing zero values, a quantile regression analysis is employed for the Indonesian equity market data over the period of 2000-2010. The results show that the post-issue performance can be explained by different types of intended use of proceeds. Fixed asset investment and investment in stock market shares will lead to better operating performance for average and high performing firms only. Allocation to other usages leads to poor operating performance. The findings were found to be robust when ownership structure was included in the models. These results have policy implications for the management of IPO proceeds.