Are initial public offerings significant to firm performance in an emerging stock market? Evidence from China

Purpose: This study investigates firm performance after going public and explores whetherInitial Public Offerings (IPOs) contribute to it.Design/methodology/approach: This study employs comprehensive regression models toexamine IPO significance to both operating performance and market performance.Findings/results: It suggests that IPO firms retain their growth over the first 3 years aftergoing public, but the growth does not sustain after the third year in terms of profit-relatedindicators, which is distinguishing from prior research. IPOs may contribute to firms’ marketperformance only, they are insignificant to firms’ operating performance in general, whilstindustry-adjusted evidence suggests that IPOs are negatively associated with operatingperformance in terms of return on assets, return on sales and debt to assets.Practical implications: The practical implication for managers is to spend more IPO capitalson business operations to maximise firm value.Originality/value: Market value is taken into account, whilst operating performance isconsidered only by prior research, and it presents some different findings from prior studiesbased on developed stock markets