THE IMPACT ON OPERATING PERFORMANCE OF INITIAL PUBLIC OFFERING COMPANIES IN THAILAND

Abstract

This study uses initial public offering (IPO) companies in SET and MAI from 2001 to 2014 to study the operating performance after becoming listed in the stock exchange. Operating performance was measured by using operating return on assets, operating cash flow on total assets, sales, assets turnover and capital expenditure.

The results of section 1 show that the operating performance after being listed in the stock exchange significantly changed. Sales and expansion of investments in the form of capital expenditure improved, but the efficiency of assets management, profitability showed a decline. The reason for the decline may be due to a change in the shareholding structure after becoming a listed company; causing agency costs, or from window dressing by the company’s management to advertise good performance to facilitate the selling of initial public offering shares to investors.

Section 2 study the factors that have a significant relationship with the change in operating performance after being listed in the stock exchange by using 2 variables to evaluate the operating performance, i.e. operating return on assets and operating cash flow on total assets. The operating performance measures were obtained by using: (1) the change in operating performance after listed in the stock exchange (median change) and (2) the change in operating performance after listed in the stock exchange adjusted by the change in operating performance of the same industry, sector and same year as the IPO companies (median industry-adjusted).

The results of section 2 show that only Bank Loan has a significant negative relationship between median change and median industry-adjusted change in these two operating performance measures. Since source of funds from borrowing causes higher risks in terms of liquidity and cash flow management, this directly affects its operations and profitability. However, other factors were found to have significant relations with changes in operating performance after being listed in the stock exchange; which vary on each operating performance variable.