The determinants of IPOs. Why firms go public in times of a crisis.
Welleweerd, F.J.1
February 28, 2013
Abstract
This paper examines the reasons for an initial public offering (IPO) during times of crisis. Most of the literature focusses on hot issue periods, where cold issue periods are less examined. It’s unknown where the IPO money goes during a cold issue period. This research examines the crisis period 2008-2009 for IPOs in Europe and North America with a total sample of 162 IPOs. Comparing accounting variables from the year before until three years after the IPO, I find that IPO money from IPOs in times of crisis is used to safe as cash and to fund research and development.
Keywords: IPO, public offering, going public decision.
JEL codes: G30
1 Introduction
The IPO is a topic researched and discussed for years. Most researchers cover the going public decision and cover benefits and costs of going public. They distinguish the following benefits: investors recognition, reputation and credibility; funding for growth opportunities; mergers and acquisitions; financial flexibility and bargaining power with banks; diversification, exit strategy and a way to transfer control; lower cost of capital; external monitoring; window of opportunity; and stock liquidity. Of course there are also costs of going public. Earlier research finds: adverse selection and moral hazard; fixed costs; loss of confidentiality; and loss of control about the identity of shareholders. In this research the
1
2 focus is on funding for growth opportunities, mergers and acquisitions and lower cost of capital. I want to know where the money raised from the IPO goes. Especially during a crisis period this is an interesting question, because the timing is not good. Normally during a crisis there is no window of opportunity. Stock prices are low, so it’s not interesting to go public. It’s impossible for the company to maximize the amount of money raised in the IPO. The other benefits of going public are not major motivations in the going public decision and without a window of opportunity it would be a costly way to obtain these benefits. This makes the funding for growth opportunities, mergers and acquisitions and lower cost of capital the major benefits that could be reasons to go public even when there is no window of opportunity. Therefore the following research question forms the basis in this research. Where does IPO money go during the crisis in the years 2008-2009? Do firms that go public during a crisis use the IPO money to finance acquisitions, to purchase inventory, to make capital expenditures, or to reduce long term debt. To answer this research question a sample is computed that exists of 162 IPOs from 23 countries from Europe and North America over the years 2008-2009. For the year before the IPO and three years after the IPO the accounting figures total assets, inventory, cash, long term debt, capital expenditure (capex), acquisitions and research and development (R&D) are used to find the changes of these accounting figures in three years after the IPO. This to find out where the IPO money goes in the three years after the IPO. The results show that IPO money is used to safe as cash and to fund R&D.
The structure of this paper will be as follows. Section 2 will describe the benefits and the costs of going public. In section 3 the used methodology of this research will be described followed by section 4 where the used data is presented. In section 5 the results will be presented and compared to earlier studies. Finally section 6 draws the conclusion on these results.
2 Background literature
3
2.1 Benefits of going public
When looking at the benefits we find investor recognition, reputation and credibility; funding for growth opportunities; mergers and acquisitions; financial flexibility and bargaining power with banks; diversification, exit strategy and a way to transfer control; lower cost of capital; external monitoring; window of opportunity; and stock liquidity.
Investors recognition, reputation and credibility
Investor recognition, reputation and credibility is one of the major benefits of going public according to the research of Bancel and Mittoo (2009). Eighty percent of the interviewed CFO’s agree that an IPO brings positive publicity and increases the image and reputation of the company. Roell (1996) confirms this and states that going public is a positive signal to the working force, suppliers and customers. The work force feels more sure about their jobs. Suppliers give the company trade credit and feel saver doing this when the firm goes public. From the customer perspective services and warranty are very important, this is better guaranteed when the firm is public. All this saves the different counterparties time, because there is no need to investigate the company themselves. This information is now easily available. Ritter and Welch (2002) give the same reasoning in their research. Brau and Fauwcett (2006) argue that the analyst coverage is better when a firm is public. Analyst recommendations are often biased upwards, so the image of the company is better after the IPO.
Funding for growth opportunities
4
Mergers and acquisitions
Mergers and acquisitions (M&A) work in two directions when it comes to IPOs. First a company that goes public receives money which can be used to acquire other companies. Secondly a company that goes public is easier to take over for another company, because after the IPO shares can be purchased by other companies. Celikyurt et al. (2010) did research in acquisition activity of IPO firms over a 20 year period from 1985 to 2004. They look into the pre-IPO acquisition activity and the post-IPO acquisition activity and find an interesting result. In the 5 years before an IPO only 19% of the companies make an acquisition as a private firm. After the IPO, when the company is public 77% of the firms make at least one acquisition in their first five years as a public company. When they look at the first year as a public company 31% of the companies acquire at least one other company. According to Celikyurt et al. (2010) a typical IPO firm only acquires 0.43 firms in the five years prior to the IPO and acquires four companies in the first five years after the IPO. Rau and Stouraitis (2011) did research on corporate event waves (IPO, SEO, M&A and share repurchases) on 151,000 corporate transactions during the period 1980-2004. In their research they find that only 3% of the cash financed and 2% of the stock-financed M&A deals can be explained by acquisitions of newly public companies. Considering these two researches we can conclude that private firms need the IPO money to make acquisitions and that only a small number of firms need the IPO to be acquired themselves.
Financial flexibility and bargaining power with banks
5
Diversification, exit strategy and a way to transfer control
Zingales (1995) wrote a paper about the insider ownership and the decision to go public. In his research he states that the IPO frequently is the largest equity issue a company will ever make. It’s a useful channel for the entrepreneur to get rewarded for his effort building up the company. It’s also a way to transfer control from the founders of the company to a new management board. The founders have the opportunity to stay owners, but can stop making the daily management decisions. Kim and Weisbach (2008) come to the same conclusion and state that wealth can be transferred from new shareholders to old shareholders through an IPO. The IPO also increases the liquidity of insiders and the firm itself. Now shares can be traded in the stock market, this makes it easier for owners to sell their ownership in the company. Roell (1996) states that the exit strategy is a reason for a company and its owner to start an IPO, but the liquidation of the shares of the founders starts in the years following the IPO instead of immediately during the IPO. Diversification of the portfolio of the owner of the company is also a reason to go public. Pagano et al. (1998) found only little evidence for this reasoning. But still the IPO reduces the riskiness of the company, because of the decrease in leverage. This indirectly diversifies the portfolio of the owners of the company. Chemmanur and Fulghieri (1999) also agree on the diversification benefit for the venture capitalist that at first privately invested in the company. After the IPO it gives him the possibility to diversify. Black and Gilson (1998) describe that the exit strategy is a very import part when it comes to an IPO. Start-up companies, firms with high growth and highly innovational companies are at first financed by venture capitalist. But there always comes a point in the lifecycle of such companies when the venture capitalist wants to exit. This can have several reasons, for example it needs the money for other investments, or the company is not doing as well as expected or the company has reached a certain point where the venture capitalist is no longer needed. An IPO is the ideal way to transfer the ownership from venture capitalists to other shareholders trading on the stock market.
Lower cost of capital
6 decreased after the IPO. This result mainly comes from the companies that reduced their leverage after the IPO. This is in line with Pagano et al. (1998). Subrahmanyam and Titman (1999) also agree on the fact that going public lowers the cost of capital. They argue that the amount of free available information affects the cost of capital. If many potential investors use the information their trading becomes more efficient and the valuation becomes more precise. This will lower the cost of capital compared to when there is less information available and the company is not publicly traded. Chemmanur and Fulghieri (1999) fully underwrite the view of Subrahmanyam and Titman (1999).
External monitoring
According to Pagano and Roëll (1998) external monitoring becomes beneficial when the number of external shareholders increases. The more shareholders the more efficient the external monitoring and the bigger the benefit for the company that goes public. When the company is private and the number of shareholders reaches a certain level the monitoring of each individual shareholders slows the company down and this costs money. In that case it’s better to go public, because then the information of the company becomes publicly available. Every shareholder has easy access and the monitoring is done by only a few parties. Furthermore Pagano and Roëll (1998) state that the going public decision comes with extra accounting and disclosure standards. These rules make that the listed company can’t extract any private benefits, because of the monitoring. Holmström and Tirole (1993) state that the external monitoring prevents managerial misbehavior. Bancel and Mittoo (2009) refer also to the possible costs of the monitoring and the disclosure standards. All this information is now also accessible by competitors. Sensitive information could then easily come into the wrong hands.
Window of opportunity
7 support for this reason. Although that almost every manager is happy with the timing of their IPO, there is only 40% of the interviewed CFOs that thinks they exploited favorable market conditions. Ritter and Welch (2002) also under scribe that entrepreneurs use a window of opportunity and call it market timing theories. They suggest that if in a bear market the value placed on the company is to low according to the entrepreneurs information. He will wait for a bull market and a market value above the value according to his information. In the research of Benninga et al. (2005) they argue that entrepreneurs time their decision to go public and wait for better investment opportunities to get the maximum out of the IPO. Entrepreneurs wait for better economic times and high cash flows. At some point in time cash flows reach a turning point at which it becomes beneficial to go public. If the cash flow is below this turning point it’s more beneficial to stay private. Normally high cash flows come with good economic circumstances and therefore the hot issue periods take place when stock prices are high.
Stock liquidity
According to Pagano et al. (1998) an IPO affects the liquidity of a company’s stock. It becomes way easier for small shareholders to acquire the shares of a listed company than in case of a delisted company. The shares of a private company can only be sold when the seller does informal searching and finds a seller that is interested in the shares. A public company its stocks are traded in the market. Liquidity is much higher and therefore it’s much easier for a seller to find a buyer. The trading is also much cheaper. Trading must reach a certain volume, before public trading becomes cheaper than private trading. So the bigger the company the more likely that it’s beneficial to go public. Brau et al. (2006) interviewed 438 CFO’s and 82.5% of them thinks that share liquidity will increase after the IPO. This corresponds with the view of Pagano et al. (1998). Bancel and Mittoo (2009) state that the value of the company increases when it goes public. Although it is a benefit, it’s not a major reason to go public. Maug (1998) did research on the stock liquidity of going public and find that it’s easier and less costly to purchase company shares. Liquid markets can have two opposing effects. At the one hand it can facilitate corporate control and large shareholder can correct managerial failure. On the other hand large shareholders can sell their shares just before an expected fall in the share price. Maug (1998) shows that the first takes the overhand.
2.2 Costs of going public
8 and name adverse selection and moral hazard, fixed costs and loss of confidentiality. Pagano and Roëll (1998) find loss of control about the identity of shareholders as a costs of going public. These four are used in this research to cover the costs of going public.
Adverse selection and moral hazard
Adverse selection and moral hazard are both indirect costs of going public. According to Pagano et al. (1998) adverse selection causes underpricing of the firms stock when going public. Due to asymmetric information between the investors and the owners of the firm the stocks do not sell at the right value. The availability of information is the biggest problem creating the adverse selection and moral hazard costs. This makes that it’s especially difficult for small and young firm to get the fair value for their shares, because they have a minimal track record. Therefore investors are reserved when bidding at the company shares in an IPO. Ritter (1987) also finds that the costs of underpricing are significant. The greater the ex-ante information uncertainty about the firm the greater the underpricing. When potential investors have differential information they have a disadvantage compared to the informed investors. This causes adverse selection costs to the uninformed investors.
Fixed costs
Fixed costs are costs like legal expenses, auditing costs, accounting costs, printing costs and other fees. All these are direct costs that come with the going public decision. Pagano et al. (1998) mentions initial underwriting fees and registration fees and costs that return every year like auditing costs, accounting costs, certification and stock exchange fees. According to Pagano et al. (1998) these fees are almost fixed and therefore these costs relatively have a greater impact on smaller companies than on bigger companies. Ritter (1987) mentions that the direct costs are primarily investment banking fees. Besides this investment banking fees there are underwriting commission, legal, printing and auditing expenses and other out of pocket costs. Ritter (1987) also finds that the direct costs are relatively high for smaller companies. An indication of the direct cost is given as $250,000 plus an additional 7% of the proceeds from the offer. Brau et al. (2006) interviewing 438 CFOs find that 59.6% and 59.2% of the CFOs finds the underwriting and auditing fees a disadvantage to conducting an IPO. Registration fees and promotion fees play a less important role when it comes to the IPO decision, respectively 36.6% and 34.8%.
Loss of confidentiality
9 cost, because this information is not only available to the investors. It’s also available to the competitors of the firm. They now also have insight in the company’s activities and performance. Furthermore for example R&D projects can be copied by competitors or there is insight in future marketing strategies. With all the publicly available information the company is also closely watched by the tax authorities. This gives it less space to creatively use the tax system. Pagano et al. (1998) mark the public availability of R&D information as the most important loss of confidentiality. Therefore this cost could be significant for highly innovative companies. In the research of Brau et al. (2006) loss of confidentially is also a serious issue when it comes to an IPO. With 63.5% of the 438 interviewed CFOs finding the loss of confidentiality a serious cost.
Loss of control about the identity of shareholders
This cost is not mentioned in the research of Pagano et al. (1998) but in the research of Pagano and Roëll (1998). The going public decision comes with public trading. In principle everyone is able to purchase the shares of the company after the IPO. Therefore the company loses control on selecting the shareholders. Normally there are restrictions on the transfer of ownership of shares when the company is private. For example before selling the shares the shareholder has to offer the shares to the other shareholders. This is not possible anymore after the IPO. This makes the shareholder more vulnerable. It could cause unwelcome changes in the shareholder register. Furthermore the ownership can transfer from a few large shareholders to a lot of small shareholders.
2.3 The use of IPO money
12
3 Methodology
Kim and Weisbach (2008) research the motivations for public equity offers during the period 1990-2003. In their research they draw conclusions on the going public decisions when stock prices are less favorable, but never show the specific results of a period with less favorable stock prices. They include the global dot-com bubble and the recession that followed from 2001-2003 in their sample, but there are no specific numbers and outcomes during this crisis period. Kim and Weisbach (2008) state that in times of favorable stock prices IPO money is for the largest part kept as cash. When stock prices are less favorable the funds raised are used to finance acquisitions, to purchase inventory, to make capital expenditures, or to reduce long term debt. It’s interesting to explore IPOs during the subprime mortgage crisis in the years 2008 and 2009. The years 2008 and 2009 never can be part of a window of opportunity. Because of the subprime mortgage crisis stock prices plumbed and the economic situation became critical. So there is no chance that companies are exploiting the high valuation of their company. When researching this time period we are able to find out where the money goes when stock prices are less favorable or where the money goes in times of crisis. Do firms that go public during a crisis use the IPO money to finance acquisitions, to purchase inventory, to make capital expenditures, or to reduce long-term debt. In long-terms of an hypothesis the follow hypothesis can be formulated:
H₁: IPO money is used to finance acquisitions, to purchase inventory, to make capital expenditures, or to reduce long term debt.
To find the answer to the stated hypothesis equation 1 will be estimated:
Equation 1: ∑ ∑
13 chose to use the first option, all country dummies are included with no intercept. This makes it easier to interpret the per country results. Equation 1 will be tested on the sample presented in table 2 and as a robustness check it will also be tested without using the year and country dummies using the sample presented in table 2 and on the sample excluding very large deals presented in table 12.
Table 1: Calculation of the variables
Variable Calculation ∆Total assets [( ) ] ∆Inventory [( ) ] ∆Cash [( ) ] ∆Long term debt
[( ) ] ∑Capex [(∑ ) ] ∑Acquisitions [(∑ ) ] ∑R&D [(∑ ) ]
This table presents how the different dependent variables used in equation 1 are calculated. The first column gives the description of the variable and the second column gives a specification of the calculation of the variable. The dependent variables are calculated for the first three years after the IPO, so t = 1, 2, 3. The log is taken to normalize the variables and minimize the effect of outliers.
14 an expensive way to obtain the mentioned benefits, because when stock prices are low the amount raised from the IPO is not maximized. In the following section the data used in this research will be described.
4 Data
The dataset exists of 162 IPO companies from Europe, Canada and the United States in the period 2008 to 2009. As shown in table 2 in 2008 a total of 84 companies went public, where in 2009 a total of 78 companies went public. All selected firms are industrial firms. Financial firms and firms that lack data are excluded from the sample. Data is gathered from Zephyr and Thomson Financial Datastream. The United States is the country with the most IPOs in 2008 and 2009. Respectively 20% and 41% of the number of IPOs in 2008 and 2009 is from the United States. When looking at the total deal value in the United States respectively 95% and 56% in 2008 and 2009 is from the United States. For 2008 Canada is the second country when looking at the number of IPOs with 24%. When looking at the total deal value over 2008 Great Britain comes second with 2% of the total deal value in 2008. For 2009 again Canada comes second when looking at the number of IPOs with 17%. Poland comes second in 2009 when it comes to total deal value. Poland represents 15% of the total deal value in 2009. When looking at the continents Europe and North America in 2008 and 2009 comparing the number of IPOs and the total deal value you find the following. In 2008 44% of the IPOs are in North America and 56% of the IPOs are in Europe. Comparing the total deal value in 2008 for both continents, 95% of the total deal value comes from North America en 5% comes from Europe. This due to a few very large deals within the United States. For 2009 58% of the IPOs are in North America and 42% of the IPOs are in Europe. The total deal value in 2009 in North America is 62% and 38% of the total deal value comes from Europe.
15 Ireland 1 135 1 135 Italy 5 134,858 2 166,617 7 301,475 Lithuania 1 15,289 1 15,289 Luxembourg 1 372,379 1 372,379 Malta 2 13,621 2 13,621 Norway 2 7,295 2 7,295 Poland 3 472,331 12 2,737,208 15 3,209,538 Romania 1 87,717 1 87,717 Spain 1 458,341 1 119,761 2 578,102 Sweden 9 20,556 5 4,540 14 25,096 Switzerland 2 79,651 2 79,651 Turkey 1 1,973,867 1 7,494 2 1,981,362 United States 17 122,416,550 32 9,903,823 49 132,320,373 84 129,294,696 78 17,810,960 162 147,105,656
This table contains the number of IPOs in the sample for the years 2008 and 2009 per country. The total deal values are presented in thousands of dollars.
16
Table 3: Descriptive statistics
t min. max. med. avg. sd. n
∆Total assets 1 -1.809 3.344 0.282 0.346 0.584 162 2 -1.803 3.958 0.449 0.569 0.801 162 3 -3.588 5.613 0.585 0.838 1.152 162 ∆Inventory 1 -1.921 2.044 0.000 0.058 0.445 127 2 -1.252 3.211 0.000 0.149 0.585 127 3 -1.563 4.054 0.000 0.248 0.711 127 ∆Cash 1 -4.699 5.470 0.506 0.693 1.419 156 2 -4.294 10.041 0.531 0.731 1.763 156 3 -7.512 9.097 0.750 0.802 2.005 156
∆Long term debt 1 -0.877 0.764 0.000 -0.014 0.189 159
2 -1.174 1.554 0.000 0.004 0.277 159 3 -0.895 2.456 0.000 0.049 0.372 159 ∑Capex 1 0.000 1.124 0.030 0.102 0.184 146 2 -0.066 2.107 0.123 0.260 0.377 146 3 -0.070 3.996 0.216 0.455 0.662 146 ∑Acquisitions 1 0.000 0.220 0.000 0.007 0.086 162 2 -0.116 0.578 0.000 0.025 0.086 162 3 -0.116 0.955 0.000 0.043 0.137 162 ∑R&D 1 0.000 0.962 0.000 0.031 0.118 162 2 0.000 1.304 0.000 0.067 0.193 162 3 0.000 3.720 0.000 0.143 0.452 162
Total deal value / 0.001 7.859 0.690 1.156 1.426 162
Total assets₀
This table presents the descriptive statistics on the outcomes of the calculations of table 1. The variables are used in equation 1. Where t = 1, 2 and 3 represent the first, second and third year after the IPO. The third column shows the minimum, the fourth column the maximum, the fifth column the median, the sixth column the average, the seventh column the standard deviation and the eighth column the number of firms.
5 Results
17 acquisitions, to purchase inventory, to make capital expenditures, or to reduce long term debt. The results will be discussed per variable and will if possible be compared to earlier research.
5.1 Change in total assets
Table 4 shows the results for the change in total assets. The coefficients on total deal value / total assets₀ are positive and statistically significant different from zero for all three years after the IPO. Respectively 0.45 in the first year, 0.46 in the second year and 0.35 in the third year after the IPO. This makes perfect sense, because you would expect that the total assets increase when comparing total assets before the IPO to total assets after the IPO. IPO money flows into the firm and is invested. The reason why there is no one on one relationship is, is because money could also be used at the liabilities side of the balance sheet. For example decreasing debt or payment of other creditors. For the 2009 IPOs there is an significant additional increase of 0.27 in the first year and 0.20 in the second year after the IPO.
Table 4: Results change in total assets
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
18
Turkey -0.04 0.47 -0.01 0.80 -0.02 0.76
United States -0.11 0.16 -0.05 0.53 0.00 0.96
n 162 162 162
R² 0.55 0.58 0.63
This table contains the outcomes of equation 1 when using ∆Total assets as the dependent variable. Year 0-1 is the first year, Year 0-2 is the second year and Year 0-3 is the third year after the IPO. The βⁱ is the beta coefficient. Furthermore the p-values are presented. The chosen significance level is 5%, significant outcomes are presented in bold. The n represents the number of IPO firms from the sample that are used in the calculations. The R² is the coefficient of determination and shows how well the model fits the data.
5.2 Change in inventory
Overall there is no increase in inventory as I expected. None of the coefficients on total deal value / total assets₀ is significant. There are no significant differences between the year 2008 and 2009. When looking into country results in the first year after the IPO Cyprus shows a significant increase of 0.37, Luxembourg shows a significant decrease of 0.31 and the United States shows a significant increase of 0.25 of inventory. Here the United States outcome is the most interesting, because the other countries only have a few IPOs during 2008 and 2009. For the United States the outcome is positively significant with 0.25 in the first year and 0.29 in the third year after the IPO. According to Kim and Weisbach (2008) inventory is one of the assets where companies invest in during periods when stock prices are less favorable. In this research I don’t find strong evidence that supports this argumentation.
Table 5: Results change in inventory
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
19 Italy 0.07 0.40 0.03 0.77 0.19 0.04 Lithuania 0.08 0.29 -0.09 0.29 -0.02 0.78 Luxembourg -0.31 0.00 -0.17 0.04 -0.10 0.24 Malta -0.03 0.69 -0.04 0.60 -0.01 0.89 Norway -0.06 0.45 -0.02 0.76 -0.02 0.80 Poland -0.02 0.79 -0.04 0.68 0.08 0.41 Romania 0.03 0.72 -0.01 0.88 -0.05 0.56 Sweden 0.01 0.94 0.03 0.75 0.14 0.14 Turkey 0.02 0.81 0.03 0.74 0.11 0.22 United States 0.25 0.03 0.20 0.08 0.29 0.01 n 127 127 127 R² 0.38 0.33 0.28
This table contains the outcomes of equation 1 when using ∆Inventory as the dependent variable. Year 0-1 is the first year, Year 0-2 is the second year and Year 0-3 is the third year after the IPO. The βⁱ is the beta coefficient. Furthermore the p-values are presented. The chosen significance level is 5%, significant outcomes are presented in bold. The n represents the number of IPO firms from the sample that are used in the calculations. The R² is the coefficient of determination and shows how well the model fits the data.
5.3 Change in cash
The results for cash are significant in all three years after the IPO. Respectively 0.43 in the first, 0.33 in the second and 0.34 in the third year after the IPO. In the first year for 2009 there is a significant additional increase in cash of 0.25. These results are remarkable, because according to Kim and Weisbach (2008) IPO companies safe IPO money as cash in favorable IPO periods. In a unfavorable period, the crisis of 2008 and 2009, this is hard to explain. It could be because of extra liquidity needs or just to strengthen the balance sheet. It seems an expensive way to gain extra liquidity, because the stock prices are unfavorable. The company is not able to maximize the proceeds from the IPO. The results on the change in cash do not support the hypothesis.
Table 6: Results change in cash
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
20 Germany 0.04 0.56 0.06 0.43 0.06 0.39 Denmark 0.07 0.32 0.12 0.10 0.07 0.37 Spain 0.00 0.96 -0.04 0.57 -0.03 0.70 France 0.06 0.38 0.09 0.25 0.04 0.56 Great Britain 0.16 0.02 0.24 0.00 0.21 0.00 Greece 0.04 0.53 0.01 0.89 0.03 0.72 Ireland 0.04 0.53 0.04 0.59 -0.01 0.90 Italy 0.01 0.89 0.03 0.64 0.06 0.46 Lithuania -0.02 0.73 -0.01 0.89 -0.05 0.48 Luxembourg -0.01 0.86 -0.05 0.46 0.02 0.80 Malta -0.02 0.79 -0.06 0.42 -0.04 0.54 Norway -0.13 0.06 -0.02 0.77 -0.06 0.44 Poland 0.06 0.42 0.02 0.78 -0.09 0.27 Romania -0.02 0.80 -0.03 0.63 -0.03 0.63 Sweden 0.08 0.25 0.08 0.28 0.08 0.29 Turkey 0.01 0.92 -0.08 0.25 -0.04 0.62 United States -0.13 0.14 -0.09 0.36 -0.06 0.53 n 156 156 156 R² 0.43 0.34 0.33
This table contains the outcomes of equation 1 when using ∆Cash as the dependent variable. Year 0-1 is the first year, Year 0-2 is the second year and Year 0-3 is the third year after the IPO. The βⁱ is the beta coefficient. Furthermore the p-values are presented. The chosen significance level is 5%, significant outcomes are presented in bold. The n represents the number of IPO firms from the sample that are used in the calculations. The R² is the coefficient of determination and shows how well the model fits the data.
5.4 Change in long term debt
21
Table 7: Results change in long term debt
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
total assets₀ 0.11 0.36 0.00 0.97 -0.02 0.88 Year dummy -0.16 0.21 -0.19 0.11 -0.15 0.26 Australia 0.10 0.19 -0.01 0.88 0.00 0.98 Belgium -0.04 0.65 -0.34 0.00 0.07 0.42 Bulgaria 0.02 0.82 0.02 0.80 0.01 0.86 Canada -0.06 0.62 0.18 0.11 0.25 0.04 Switzerland -0.04 0.65 -0.02 0.76 -0.02 0.83 Cyprus 0.10 0.19 0.18 0.02 0.09 0.26 Germany 0.01 0.89 0.08 0.28 0.06 0.50 Denmark 0.04 0.58 0.01 0.87 -0.01 0.90 Spain -0.01 0.93 0.03 0.69 0.03 0.74 France -0.05 0.55 0.00 0.95 -0.01 0.87 Great Britain -0.11 0.17 0.03 0.68 0.08 0.36 Greece 0.11 0.17 0.11 0.13 0.08 0.30 Ireland -0.08 0.30 0.01 0.85 0.00 1.00 Italy -0.05 0.54 0.02 0.76 0.05 0.52 Lithuania 0.10 0.19 -0.05 0.54 -0.01 0.86 Luxembourg -0.14 0.07 -0.09 0.21 -0.05 0.54 Malta 0.00 0.95 0.06 0.45 0.03 0.73 Norway -0.25 0.00 -0.17 0.03 -0.12 0.13 Poland 0.05 0.56 0.07 0.42 0.11 0.24 Romania -0.01 0.94 -0.01 0.92 0.00 0.96 Sweden 0.07 0.39 0.07 0.40 0.12 0.18 Turkey -0.11 0.17 -0.06 0.43 -0.05 0.57 United States 0.03 0.76 0.03 0.76 0.04 0.74 n 159 159 159 R² 0.19 0.24 0.11
This table contains the outcomes of equation 1 when using ∆Long term debt as the dependent variable. Year 0-1 is the first year, Year 0-2 is the second year and Year 0-3 is the third year after the IPO. The βⁱ is the beta coefficient. Furthermore the p-values are presented. The chosen significance level is 5%, significant outcomes are presented in bold. The n represents the number of IPO firms from the sample that are used in the calculations. The R² is the coefficient of determination and shows how well the model fits the data.
5.5 Change in capex
22 in the third year the coefficient is 0.59. Poland has a first year coefficient of 0.16, a second year coefficient of 0.23 and a third year coefficient of 0.20. Both countries have more than just a few public offerings and the money of these IPOs is partly used for capital expenditure. This is according to my own expectations, but also in line with the research of Kim and Weisbach (2008) who state that IPO money is used to fund growth opportunities. This is also in accordance with Pagano et al. (1998) and Mittoo (2009). Although the significant results for Canada en Poland there is no overall significant support for an increase in capital expenditure after the IPO. So there is no support for the stated hypothesis.
Table 8: Results change in capex
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
total assets₀ 0.07 0.47 0.11 0.29 0.06 0.51 Year dummy 0.04 0.67 -0.11 0.28 -0.09 0.39 Australia 0.05 0.45 0.04 0.56 0.03 0.59 Belgium 0.12 0.04 0.06 0.33 0.06 0.36 Bulgaria 0.01 0.92 0.04 0.50 0.03 0.60 Canada 0.20 0.02 0.45 0.00 0.59 0.00 Switzerland 0.01 0.91 0.01 0.94 0.00 0.95 Cyprus 0.34 0.00 0.30 0.00 0.23 0.00 Germany 0.00 0.99 0.05 0.42 0.07 0.25 Denmark 0.48 0.00 0.12 0.07 0.09 0.15 Spain 0.00 0.99 0.00 0.99 0.00 1.00 France 0.02 0.70 0.07 0.29 0.05 0.42 Great Britain 0.10 0.08 0.13 0.04 0.12 0.06 Greece 0.01 0.84 0.05 0.48 0.03 0.63 Ireland 0.07 0.24 0.04 0.59 0.02 0.73 Italy 0.01 0.87 0.01 0.84 0.02 0.74 Lithuania 0.05 0.41 0.09 0.16 0.05 0.39 Luxembourg 0.07 0.23 0.02 0.77 0.01 0.84 Malta 0.01 0.89 0.01 0.89 0.01 0.90 Norway 0.04 0.52 0.00 0.99 0.00 0.99 Poland 0.16 0.02 0.23 0.00 0.20 0.01 Romania 0.04 0.49 0.04 0.53 0.04 0.49 Sweden 0.28 0.00 0.14 0.03 0.12 0.07 Turkey 0.06 0.29 0.07 0.28 0.06 0.35 United States 0.08 0.32 0.20 0.03 0.17 0.06 n 146 146 146 R² 0.60 0.50 0.53
p-23
values are presented. The chosen significance level is 5%, significant outcomes are presented in bold. The n represents the number of IPO firms from the sample that are used in the calculations. The R² is the coefficient of determination and shows how well the model fits the data.
5.6 Change in acquisitions
The results for acquisitions are insignificant for the coefficient of the total deal value / total assets₀. So there does not seem to be an increase in acquisitions, this is again the opposite of my expectations and the opposite of the view of Kim and Weisbach (2008). The country dummies of Great Britain and the United States are significant. For Great Britain only in the first year, a positive value of 0.32. The United States in all three years after the IPO with values of 0.25, 0.42 and 0.48. So in these countries IPO money is used to make acquisitions. Overall there is no strong support that IPO money is used to make acquisitions. Brau and Fawcett (2006) state that acquisition reasoning is most important. Celikyurt et al. (2010) and Bancel and Mittoo (2009) also state that IPO firms are more active acquiring than being acquired. The results in this research shows the contrary.
Table 9: Results change in acquisitions
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
24 Romania 0.00 1.00 0.00 1.00 0.00 1.00 Sweden 0.00 0.95 0.00 0.99 0.02 0.85 Turkey 0.01 0.93 0.00 0.99 0.01 0.89 United States 0.25 0.02 0.42 0.00 0.48 0.00 n 162 162 162 R² 0.17 0.22 0.22
This table contains the outcomes of equation 1 when using ∑Aquisitions as the dependent variable. Year 0-1 is the first year, Year 0-2 is the second year and Year 0-3 is the third year after the IPO. The βⁱ is the beta coefficient. Furthermore the p-values are presented. The chosen significance level is 5%, significant outcomes are presented in bold. The n represents the number of IPO firms from the sample that are used in the calculations. The R² is the coefficient of determination and shows how well the model fits the data.
5.7 Change in R&D
The coefficient of total deal value / total assets₀ is significant in the two years after the IPO for R&D. For Canada the third year is significant with 0.23. This result matches the stated expectations and corresponds with the research of Kim and Weisbach (2008). Subrahmanyam and Titman (1999) state that the money raised in the IPO can be used to fund future growth opportunities. This to fund new products or developments that need additional capital to be realized. This research finds evidence that supports this argumentation. The growth opportunities mentioned by Pagano et al. (1998) also fit the results. Investment in R&D is part of the growth opportunities of a company. This supports the stated hypothesis. The IPO money is used to finance R&D.
Table 10: Results change in R&D
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
25 Ireland 0.05 0.48 0.00 0.99 0.00 1.00 Italy -0.06 0.42 -0.06 0.41 -0.03 0.69 Lithuania 0.00 0.96 0.00 0.96 0.00 0.99 Luxembourg 0.00 0.98 0.00 0.98 0.00 1.00 Malta -0.02 0.76 -0.02 0.80 -0.01 0.94 Norway 0.05 0.49 0.05 0.53 0.04 0.63 Poland -0.01 0.90 -0.06 0.46 -0.07 0.45 Romania 0.00 0.99 0.00 0.99 0.00 1.00 Sweden -0.08 0.34 0.04 0.64 0.05 0.53 Turkey 0.00 0.96 -0.01 0.84 -0.02 0.85 United States 0.14 0.19 0.10 0.35 0.04 0.71 n 162 162 162 R² 0.24 0.24 0.19
This table contains the outcomes of equation 1 when using ∑R&D as the dependent variable. Year 0-1 is the first year, Year 0-2 is the second year and Year 0-3 is the third year after the IPO. The βⁱ is the beta coefficient. Furthermore the p-values are presented. The chosen significance level is 5%, significant outcomes are presented in bold. The n represents the number of IPO firms from the sample that are used in the calculations. The R² is the coefficient of determination and shows how well the model fits the data.
5.8 Robustness
26 The second check eliminates the very large IPOs within the sample of table 2. The IPOs with a deal value larger than $500,000,000 are eliminated from the sample. Only IPOs with a lower deal value are part of the sample. This sample is presented in table 12. A total of 146 IPOs is used to test equation 1 for the dependent variables. The outcomes are presented in table 13 to 19. When comparing the results of table 13 to 19 to table 4 to 10 there are only minor differences. Basically the overall results stay the same. The coefficients of total deal value / total assets₀ are close to the values found with the normal sample. There are a few changes when looking at the country dummies. For the ∆Total assets Germany has a significant increase of 0.11 in the third year within the normal sample. In the sample excluding the large deals it has a significant increase of 0.11 in the second and third year. For the ∆Total assets in Sweden the second year is significant in the normal sample with a value of 0.14, but it’s insignificant in the sample excluding large deals. The coefficient of the dummy in the second year is 0.09. For ∆Inventory the United States dummy is insignificant in the second year with a value of 0.20. In the second year when using the sample excluding the large deals the United States dummy is significant with a value of 0.22. When comparing the outcomes of ∆Cash the dummy of Belgium in the third year is different. It’s insignificant in the normal sample with 0.08, but significant in the sample excluding large IPOs with a value of 0.15. The ∆Long term debt, ∑Capex and ∑Acquisitions do not show remarkable differences. For ∑R&D the only difference is the coefficient of the third year of the Canada dummy. It’s significant in the normal sample with a value of 0.23 and insignificant in the sample excluding the large deals with the value of 0.23. For all variables the R² is a little bit higher within the sample excluding the large IPOs. So without the large deals equation 1 explains the data better. Overall the conclusions do not differ between the normal sample and the sample excluding the large deals. Therefore the used method is reliable and the results can be trusted.
6 Conclusion
27 (2008) and to find out where IPO money goes after the IPO in times of crisis, this research looks into the crisis period in the years 2008-2009. A sample of 162 IPOs in Europe and North America was tested. The change in the accounting figures total assets, inventory, cash, long term debt, capital expenditure, acquisitions and R&D are used to find out where the money of an IPO goes in times of crisis. I do not find evidence that IPO money is used to finance acquisitions, purchase inventory or to reduce long term debt. There are no overall significant outcomes found for the change in these accounting figures. For the capital expenditures there is partly evidence that supports the statement of Kim and Weisbach (2008). The capital expenditures are insignificant overall, but for the R&D in the first two years there is an overall significant increase. I do find a significant overall increase of cash after the IPO. This in contrary to the statement of Kim and Weisbach (2008) for a crisis period. It does confirm the statement of Kim and Weisbach (2008) for non-crisis periods. They state that money is saved as cash during non-crisis periods. In this research it’s shown that also during crisis periods IPO money is saved as cash. So IPO money is not used to finance acquisitions, to purchase inventory, to make capital expenditures, or to reduce long term debt. Concluding I can state that IPO firms within Europe and North America use the IPO money to safe as cash and to fund R&D during the crisis period of 2008-2009.
In future research the method applied in this research can be used to test other crisis periods. Like for example the dot com bubble or the Asian financial crisis. This to check whether the same results can be found in other crisis periods. Furthermore it could be checked on a larger sample, including more countries from all over the world.
7 References
Bancel, F., Mitto, U.R., 2009, Why do European firms go public?, European financial management 15, 844-884.
Black, B.S., Gilson, R.J., 1998, Venture capital and the structure of capital markets: banks versus stock markets, Journal of financial economics 47, 243-277.
Benninga, S., Helmantel, M., Sarig, O., 2005, The timing of initial public offerings, Journal of financial
ecnonomics 75, 115-132.
Brau, J.C., Fawcett, S.E., 2006, Initial public offerings: an analysis of theory and practice, The journal of
finance 61, 399-436.
Brau, J.C., Ryan, P.A., DeGraw, I., 2006, Initial public offerings CFO perceptions, The financial review 41, 483-511.
28 Celikyurt, U., Sevilir, M., Shivdasani, A., 2010, Going public to acquire? The acquisition motive in IPOs,
Journal of financial economics 96, 345-363.
Chemmanur, T.J., Fulghieri, P., 1999, A theory of the going-public decision, The review of financial
studies 12, 249-279.
Holmström, B., Tirole, J., 1993, Market liquidity and performance monitoring, Journal of political
economy 101, 678-708.
Kim, W., Weisbach, M.S., 2008, Motivations for public equity offers: an international perspective,
Journal of financial economics 87, 281-307.
Maug, E., 1998, Large shareholders and monitors: is there a trade-off between liquidity and control?, The
journal of finance 78, 65-98.
Pagano, M., Panetta, F., Zingales, L., 1998, Why do companies go public? An empirical analysis., The
journal of finance 53, 27-64.
Pagano, M., Roëll, A., 1998, The choice of stock ownership structure: agency costs, monitoring and the decision to go public, The quarterly journal of economics 113, 187-225.
Rau, P.R., Stouraitis, A., 2011, Patterns in the timing of corporate event waves, Journal of financial and
quantitative analysis 46, 209-246.
Ritter, J.R., 1987, The costs of going public, The journal of economics 19, 269-281.
Ritter, J.R., 1991, The long-run performance of initial public offerings, The journal of finance 71, 3-27. Ritter, J.R., Welch, I., 2002, A review of IPO activity, pricing and allocations, The journal of finance 57, 1795-1828.
Roëll, A., 1996, The decision to go public: an overview, European economic review 40, 1071-1081. Subrahmanyam, A., Titman, S., 1999, The going-public decision and the development of financial markets, The journal of finance 54, 1045-1082.
29
Appendix
Table 11: Results excluding dummy variables
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total assets
Total deal value /
total assets₀ 0.42 0.00 0.46 0.00 0.48 0.00
N 162 162 162
R² 0.17 0.21 0.24
Inventory
Total deal value /
total assets₀ 0.07 0.42 0.11 0.21 0.05 0.58
N 127 127 127
R² 0.01 0.01 0.00
Cash
Total deal value /
total assets₀ 0.29 0.00 0.22 0.01 0.32 0.00
N 156 156 156
R² 0.08 0.05 0.10
Long term debt
Total deal value /
total assets₀ 0.09 0.29 0.08 0.31 0.07 0.36
N 159 159 159
R² 0.01 0.01 0.01
Capex
Total deal value /
total assets₀ 0.03 0.76 0.22 0.01 0.28 0.00
N 146 146 146
R² 0.00 0.05 0.08
Acquisitions
Total deal value /
total assets₀ -0.01 0.92 -0.07 0.40 -0.07 0.36
N 162 162 162
R² 0.00 0.00 0.01
R&D
Total deal value /
total assets₀ 0.35 0.00 0.30 0.00 0.20 0.01
N 162 162 162
30
Table 12: Sample excluding large IPOs
Country Number of IPOs 2008 Total deal value 2008 in $ Number of IPOs 2009 Total deal value 2009 in $ Number of IPOs total Deal value total in $ Belgium 1 33,923 1 33,923 Bulgaria 1 6,681 1 6,681 Canada 20 141,814 12 445,150 32 586,964 Cyprus 1 8,097 1 470,643 2 478,741 Denmark 1 23,147 1 71,948 2 95,094 France 1 16,099 3 7,018 4 23,117 Germany 2 509,444 2 75,097 4 584,540 Great Britain 10 700,395 1 1,896 11 702,290 Greece 1 34,572 1 14,605 2 49,177 Ireland 1 135 1 135 Italy 5 134,858 2 166,617 7 301,475 Lithuania 1 15,289 1 15,289 Luxembourg 1 372,379 1 372,379 Malta 2 13,621 2 13,621 Norway 2 7,295 2 7,295 Poland 3 472,331 10 90,005 13 562,335 Romania 1 87,717 1 87,717 Spain 1 458,341 1 119,761 2 578,102 Sweden 9 20,556 5 4,540 14 25,096 Switzerland 2 79,651 2 79,651 Turkey 1 7,494 1 7,494 United States 14 1,913,691 26 3,891,018 40 5,804,709 79 5,043,355 67 5,372,472 146 10,415,827
31
Table 13: Results change in total assets excluding large IPOs
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
total assets₀ 0.48 0.00 0.47 0.00 0.35 0.00 Year dummy 0.27 0.00 0.21 0.02 0.14 0.10 Belgium 0.03 0.63 0.04 0.52 0.03 0.63 Bulgaria 0.00 0.98 0.00 0.95 -0.01 0.84 Canada 0.06 0.50 0.16 0.06 0.38 0.00 Switzerland -0.01 0.84 0.02 0.77 0.01 0.79 Cyprus 0.03 0.60 0.05 0.41 0.03 0.55 Germany 0.09 0.12 0.11 0.05 0.11 0.05 Denmark 0.02 0.77 0.00 0.96 -0.01 0.85 Spain -0.11 0.07 -0.11 0.07 -0.09 0.14 France 0.09 0.14 0.10 0.09 0.06 0.27 Great Britain 0.08 0.16 0.08 0.19 0.08 0.15 Greece 0.03 0.61 0.02 0.75 0.00 0.99 Ireland -0.01 0.93 0.06 0.33 0.04 0.46 Italy 0.03 0.61 0.05 0.43 0.08 0.17 Lithuania 0.05 0.38 0.02 0.67 0.01 0.78 Luxembourg -0.20 0.00 -0.11 0.05 -0.06 0.27 Malta 0.02 0.68 0.04 0.45 0.02 0.69 Norway -0.14 0.02 -0.09 0.12 -0.10 0.06 Poland -0.02 0.80 0.05 0.41 0.05 0.40 Romania -0.02 0.70 -0.01 0.83 -0.01 0.91 Sweden 0.13 0.03 0.09 0.16 0.12 0.04 Turkey -0.02 0.77 -0.01 0.90 -0.02 0.68 United States -0.07 0.36 -0.02 0.84 0.01 0.85 n 146 146 146 R² 0.59 0.61 0.65
32
Table 14: Results change in inventory excluding large IPOs
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
total assets₀ 0.18 0.22 0.26 0.09 0.13 0.44 Year dummy -0.24 0.07 -0.09 0.51 -0.21 0.14 Belgium -0.02 0.85 0.28 0.00 0.24 0.01 Bulgaria 0.10 0.22 0.12 0.16 0.02 0.83 Canada -0.11 0.41 -0.05 0.73 0.05 0.72 Switzerland 0.02 0.84 0.02 0.82 0.03 0.77 Cyprus 0.38 0.00 0.30 0.00 0.22 0.02 Germany -0.04 0.62 -0.04 0.68 0.02 0.85 Denmark 0.11 0.18 -0.05 0.55 0.01 0.92 Spain -0.03 0.74 -0.08 0.44 -0.02 0.88 France 0.07 0.44 0.10 0.27 0.12 0.19 Great Britain 0.16 0.06 0.09 0.34 0.15 0.12 Greece 0.03 0.70 0.01 0.90 0.03 0.76 Ireland -0.04 0.59 -0.07 0.44 -0.04 0.66 Italy 0.07 0.41 0.02 0.82 0.19 0.05 Lithuania 0.08 0.30 -0.09 0.30 -0.02 0.79 Luxembourg -0.32 0.00 -0.17 0.05 -0.10 0.25 Malta -0.03 0.69 -0.05 0.59 -0.01 0.88 Norway -0.06 0.46 -0.03 0.77 -0.02 0.80 Poland -0.05 0.60 -0.03 0.73 0.08 0.44 Romania 0.03 0.72 -0.01 0.88 -0.05 0.57 Sweden 0.01 0.94 0.02 0.79 0.14 0.16 Turkey 0.03 0.71 0.01 0.92 0.03 0.77 United States 0.31 0.01 0.22 0.05 0.31 0.01 n 113 113 113 R² 0.42 0.36 0.30
33
Table 15: Results change in cash excluding large IPOs
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
total assets₀ 0.45 0.00 0.36 0.00 0.36 0.00 Year dummy 0.28 0.01 0.25 0.03 0.25 0.03 Belgium 0.25 0.00 0.15 0.05 0.15 0.05 Bulgaria -0.02 0.77 -0.06 0.41 -0.06 0.41 Canada -0.12 0.22 -0.09 0.42 -0.09 0.42 Switzerland -0.06 0.36 -0.03 0.67 -0.03 0.67 Cyprus -0.01 0.85 -0.03 0.72 -0.03 0.72 Germany 0.03 0.62 0.05 0.50 0.05 0.50 Denmark 0.06 0.36 0.11 0.13 0.11 0.13 Spain -0.01 0.85 -0.06 0.47 -0.06 0.47 France 0.08 0.26 0.10 0.19 0.10 0.19 Great Britain 0.15 0.03 0.23 0.00 0.23 0.00 Greece 0.04 0.58 0.00 0.96 0.00 0.96 Ireland 0.04 0.53 0.04 0.60 0.04 0.60 Italy 0.00 0.98 0.02 0.75 0.02 0.75 Lithuania -0.02 0.73 -0.01 0.89 -0.01 0.89 Luxembourg -0.01 0.86 -0.05 0.47 -0.05 0.47 Malta -0.02 0.78 -0.06 0.42 -0.06 0.42 Norway -0.13 0.06 -0.02 0.77 -0.02 0.77 Poland 0.05 0.50 0.01 0.88 0.01 0.88 Romania -0.02 0.80 -0.04 0.63 -0.04 0.63 Sweden 0.07 0.33 0.07 0.40 0.07 0.40 Turkey 0.03 0.64 -0.09 0.24 -0.09 0.24 United States -0.11 0.25 -0.11 0.29 -0.11 0.29 n 141 141 141 R² 0.47 0.36 0.34
34
Table 16: Results change in long term debt excluding large IPOs
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
total assets₀ 0.08 0.56 -0.02 0.88 -0.05 0.74 Year dummy -0.11 0.40 -0,15 0.22 -0.12 0.36 Belgium -0.04 0.66 -0.34 0.00 0.07 0.43 Bulgaria 0.01 0.87 0.02 0.84 0.01 0.88 Canada -0.05 0.69 0.18 0.13 0.26 0.04 Switzerland -0.04 0.65 -0.02 0.77 -0.02 0.85 Cyprus 0.11 0.20 0.18 0.03 0.09 0.29 Germany 0.01 0.90 0.08 0.31 0.06 0.52 Denmark 0.04 0.62 0.01 0.91 -0.01 0.89 Spain 0.00 0.98 0.04 0.68 0.03 0.71 France -0.09 0.30 -0.02 0.84 -0.03 0.74 Great Britain -0.11 0.17 0.03 0.67 0.08 0.35 Greece 0.11 0.19 0.11 0.16 0.08 0.33 Ireland -0.08 0.31 0.01 0.86 0.00 1.00 Italy -0.05 0.55 0.02 0.76 0.06 0.52 Lithuania 0.11 0.19 -0.05 0.56 -0.01 0.87 Luxembourg -0.15 0.07 -0.10 0.23 -0.05 0.56 Malta 0.00 0.97 0.06 0.46 0.03 0.74 Norway -0.26 0.00 -0.17 0.04 -0.12 0.15 Poland 0.04 0.69 0.06 0.50 0.11 0.25 Romania -0.01 0.94 -0.01 0.92 0.00 0.96 Sweden 0.07 0.40 0.07 0.43 0.12 0.20 Turkey -0.16 0.06 -0.08 0.30 -0.07 0.40 United States 0.04 0.73 0.03 0.81 0.03 0.80 n 143 143 143 R² 0.20 0.25 0.12
35
Table 17: Results change in capex excluding large IPOs
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
total assets₀ 0.04 0.70 0.08 0.48 0.03 0.79 Year dummy 0.05 0.62 -0.10 0.35 -0.07 0.52 Belgium 0.13 0.04 0.07 0.31 0.06 0.35 Bulgaria 0.01 0.93 0.05 0.50 0.03 0.62 Canada 0.23 0.02 0.50 0.00 0.63 0.00 Switzerland 0.01 0.91 0.01 0.93 0.00 0.95 Cyprus 0.35 0.00 0.32 0.00 0.24 0.00 Germany 0.00 0.98 0.06 0.40 0.08 0.25 Denmark 0.50 0.00 0.13 0.06 0.10 0.15 Spain 0.00 0.99 0.00 0.99 0.00 1.00 France 0.03 0.67 0.08 0.26 0.05 0.42 Great Britain 0.04 0.50 0.06 0.40 0.07 0.32 Greece 0.01 0.85 0.05 0.48 0.03 0.64 Ireland 0.07 0.25 0.04 0.58 0.02 0.74 Italy 0.01 0.83 0.02 0.79 0.03 0.70 Lithuania 0.05 0.41 0.10 0.15 0.06 0.39 Luxembourg 0.07 0.23 0.02 0.76 0.01 0.84 Malta 0.01 0.87 0.01 0.87 0.01 0.88 Norway 0.04 0.51 0.00 0.97 0.00 0.97 Poland 0.15 0.04 0.22 0.01 0.18 0.02 Romania 0.04 0.49 0.04 0.53 0.04 0.50 Sweden 0.29 0.00 0.15 0.03 0.12 0.07 Turkey 0.07 0.29 0.05 0.48 0.04 0.54 United States 0.09 0.29 0.21 0.03 0.17 0.06 n 130 130 130 R² 0.62 053 0.55
36
Table 18: Results change in acquisitions excluding large IPOs
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
total assets₀ 0.05 0.71 -0.04 0.72 -0.07 0.58 Year dummy -0.09 0.46 0.01 0.94 -0.05 0.66 Belgium 0.00 0.99 0.00 0.99 0.00 0.98 Bulgaria 0.01 0.90 0.00 0.99 0.01 0.93 Canada 0.00 0.99 0.07 0.56 0.12 0.30 Switzerland 0.00 0.99 0.00 0.99 0.00 0.99 Cyprus 0.01 0.93 0.05 0.56 0.03 0.66 Germany 0.01 0.94 0.00 0.97 0.02 0.83 Denmark 0.01 0.95 0.00 0.98 0.01 0.92 Spain 0.00 0.97 0.01 0.91 0.02 0.81 France 0.01 0.86 0.00 1.00 0.01 0.87 Great Britain 0.34 0.00 -0.02 0.84 0.00 0.98 Greece 0.06 0.49 0.18 0.03 0.12 0.15 Ireland 0.00 1.00 0.00 1.00 0.00 1.00 Italy 0.00 0.98 0.00 0.95 0.01 0.86 Lithuania 0.00 1.00 0.00 1.00 0.00 0.99 Luxembourg 0.00 1.00 0.00 1.00 0.01 0.93 Malta 0.00 0.98 0.00 0.98 0.00 0.97 Norway 0.00 0.98 0.00 0.98 0.00 0.98 Poland 0.07 0.45 0.04 0.62 0.06 0.52 Romania 0.00 1.00 0.00 1.00 0.00 1.00 Sweden 0.01 0.93 0.01 0.95 0.02 0.81 Turkey 0.01 0.90 0.00 1.00 0.01 0.93 United States 0.25 0.03 0.44 0.00 0.50 0.00 n 146 146 146 R² 0.17 0.23 0.23
37
Table 19: Results change in R&D excluding large IPOs
Year 0-1 Year 0-2 Year 0-3
βⁱ P-value βⁱ P-value βⁱ P-value
Total deal value /
total assets₀ 0.57 0.00 0.45 0.00 0.13 0.31 Year dummy -0.07 0.56 0.11 0.36 0.18 0.15 Belgium -0.02 0.82 -0.01 0.86 0.00 0.96 Bulgaria 0.00 0.95 -0.02 0.84 -0.02 0.78 Canada -0.14 0.22 -0.07 0.56 0.23 0.06 Switzerland -0.01 0.88 -0.01 0.91 0.00 0.97 Cyprus -0.01 0.94 -0.02 0.81 -0.02 0.82 Germany -0.01 0.89 0.02 0.78 0.02 0.80 Denmark -0.02 0.75 -0.03 0.67 -0.02 0.79 Spain -0.13 0.14 -0.11 0.18 -0.05 0.60 France 0.05 0.54 0.06 0.44 0.03 0.69 Great Britain -0.07 0.35 -0.06 0.42 -0.02 0.77 Greece 0.00 1.00 -0.01 0.86 -0.02 0.84 Ireland 0.05 0.50 0.00 1.00 0.00 1.00 Italy -0.07 0.40 -0.07 0.39 -0.03 0.69 Lithuania 0.00 0.95 0.00 0.96 0.00 0.99 Luxembourg 0.00 0.98 0.00 0.98 0.00 1.00 Malta -0.03 0.74 -0.02 0.80 -0.01 0.94 Norway 0.05 0.52 0.05 0.56 0.04 0.65 Poland -0.01 0.89 -0.07 0.46 -0.07 0.45 Romania 0.00 0.98 0.00 0.99 0.00 1.00 Sweden -0.08 0.32 0.03 0.72 0.05 0.58 Turkey 0.00 1.00 -0.02 0.80 -0.02 0.77 United States 0.17 0.10 013 0.23 0.05 0.62 n 146 146 146 R² 0.20 0.26 0.26
