Excess IPO funds as an imprint: An imprinting perspective of acquisition activity

Abstract

This study focuses on the unique feature of Chinese firms’ excess funds raised from initial public offerings (IPOs) and examine why these funds have persistent impacts on the IPO firms’ acquisition activities. We extend the imprinting perspective by incorporating the notion that sudden wealth from IPOs may become a resource imprint that persistently influences the strategy of newly public firms. We argue that excess IPO funds (i.e., actual subscription value received exceeding the expected value), as sudden wealth, may create a lasting effect on IPO firms to engage in acquisition activities during the transformation from private to public status. We also introduce corporate leaders as carriers of such imprints and suggest that their stability, political experience, and social status strengthen the firm’s imprinting effect. Using a sample of Chinese IPO firms, we find evidence that supports our predictions.