A configurational approach to the intended use of IPO proceeds and performance

Abstract

Purpose

The authors seek an answer to the research question: how do the disclosure of the intended use of initial public offering (IPO) proceeds and firm characteristics jointly influence IPO performance?

Design/methodology/approach

Data on the use of proceeds, firm age, size, high- or low-tech industry, and the length of the use of proceeds section were collected from 341 IPOs in the USA, UK, and Hong Kong. Fuzzy-set Qualitative Comparative Analysis was used to predict which configurations of IPO use of proceeds and firm characteristics consistently led to above-average IPO performance.

Findings

Ten configurations of causal factors were found to lead to above-average IPO performance. Disclosure of IPO proceeds use matters for IPO performance but is contingent on firm characteristics. Whether a firm is in a high- or low-technology industry along with its size and age have distinct effects on which intended uses of proceeds are beneficial and how long their intended proceeds section must be to lead to above-average IPO performance.

Originality/value

These findings contribute to a multidimensional view of IPO performance. The authors use information processing and a management perspective to see how the use of proceeds sections help frame an IPO’s equity story. The use of a configurational methodology and a management perspective shows how IPOs can be viewed as a bundle of attributes.

Citation

Tupper, C. and Mallon, M. (2022), "A configurational approach to the intended use of IPO proceeds and performance", Management Decision, Vol. 60 No. 8, pp. 2366-2387. https://doi.org/10.1108/MD-08-2020-1100