The Impact of Strategic Investment Choices on Post-Issue Operating Performance and Survival of US IPO Firms

32 Pages Posted: 22 Apr 2008

See all articles by Bharat A. Jain

Bharat A. Jain

Towson University

Omesh Kini

Georgia State University

Date Written: 2007-11

Abstract

We examine the impact of strategic investment choices at the time of the IPO on: (i) the post-issue operating performance and (ii) the likelihood of failure and time-to-failure of newly public US firms. Our post-issue operating performance analysis uses various performance metrics, benchmarks, and expectation models. Overall, our evidence indicates that the extent of diversification and industry-adjusted capital expenditures intensity are generally positively related to changes in operating performance. We do not, however, document a consistent relation between industry-adjusted R&D expenditures and changes in operating performance. The results from our survival analysis suggest that pre-issue managerial commitment to R&D spending and developing diversified product lines enhance the ability of IPO issuing firms to remain viable for longer periods of time. Our study highlights the impact of various managerial investment decisions on the subsequent performance of newly public firms.

Suggested Citation

Jain, Bharat A. and Kini, Omesh, The Impact of Strategic Investment Choices on Post-Issue Operating Performance and Survival of US IPO Firms (2007-11). Journal of Business Finance & Accounting, Vol. 35, Issue 3-4, pp. 459-490, April/May 2008, Available at SSRN: https://ssrn.com/abstract=1122927 or http://dx.doi.org/10.1111/j.1468-5957.2007.02072.x

Bharat A. Jain (Contact Author)

Towson University ( email )

8000 York Road
Towson, MD 21252
United States
410-704-3542 (Phone)

Omesh Kini

Georgia State University ( email )

University Plaza
Atlanta, GA 30303-3083
United States
404-651-2656 (Phone)

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