Multinationality and the Performance of IPOs

36 Pages Posted: 20 Sep 2011

See all articles by Ram Mudambi

Ram Mudambi

Temple University - Department of Strategic Management

Susan M. Mudambi

Fox School of Business, Temple University; Fox School of Business, Temple University

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Date Written: June 20, 2011

Abstract

Does multinationality affect the initial public offering (IPO) performance of entrepreneurial firms? Theoretical arguments can be made for a positive effect of multinationality as well for a negative effect. We examine this question empirically by analyzing IPO data for 240 U.K. firms. We find that multinationality has significant and positive effects on long run IPO performance. This suggests that the market perceives entrepreneurial firms with multinational activities as possessing unique intangible assets that are indicative of future financial success. Factors affecting the IPO performance also differ systematically between firms with multinational operations and those without multinational operations. Stocks of intangible assets and the quality of the network significantly affect the performance of entrepreneurial IPO firms that “go global”. In contrast, domestic IPO firm performance is affected by offer size and underwriters’ perception of firm quality. The findings have important implications for entrepreneurial firms who are making decisions on “going global” and “going public”. This paper is forthcoming in Applied Financial Economics.

Suggested Citation

Mudambi, Ram and Mudambi, Susan M. and Khurshed, Arif and Goergen, Marc, Multinationality and the Performance of IPOs (June 20, 2011). Available at SSRN: https://ssrn.com/abstract=1931025 or http://dx.doi.org/10.2139/ssrn.1931025

Ram Mudambi (Contact Author)

Temple University - Department of Strategic Management ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-2099 (Phone)
215-204-8029 (Fax)

HOME PAGE: http://sbm.temple.edu/~rmudambi/index.html

Susan M. Mudambi

Fox School of Business, Temple University ( email )

1801 Liacouras Walk
Alter 524
Philadelphia, PA 19122
United States
215-204-3561 (Phone)

Fox School of Business, Temple University ( email )

1801 Liacouras Walk
524 Alter Hall
Philadelphia, PA 19122
United States

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance ( email )

Crawford House
Oxford Road
Manchester, M15 6PB
United Kingdom
+44 0 161 275 4475 (Phone)
+44 0 161 275 4023 (Fax)

Marc Goergen

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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