Financial Performance of Saudi Arabian IPO Firms

Abstract

We examine changes in the Saudi listed firms' performance around their initial public offerings. It is found that Saudi IPOs exhibit a sharp decline in the post-IPO performance compared to the pre-IPO period as measured by the ROA and ROS. We also find that the performance deterioration is significantly associated with the IPO event. Surprisingly, the performance decline comes with a significant increase in sales and capital expenditures, which do not support the lack of opportunities theory. Instead Saudi firms' performance decline can be attributed to the owners' desire to cash out as the windows of opportunity theory suggests.

Keywords: Initial public offerings, Firms’ performance, Ownership, Saudi Arabian IPOs Clustering

JEL Classification: G32, G34, M41