Anticipated and Actual Use of Capital Raised in Malaysian IPO Market

Studies in Business Economics, Vol. 19, No. 1, Spring 2016

16 Pages Posted: 7 Aug 2017 Last revised: 3 Sep 2017

See all articles by Bazeet Badru

Bazeet Badru

School of Economics, Finance and Banking. Universiti Utara Malaysia ; Universiti Utara Malaysia.

Nurwati A. Ahmad-Zaluki

Universiti Utara Malaysia - Othman Yeop Abdullah Graduate School of Business

Wan Nordin Wan-Hussin

Universiti Utara Malaysia - College of Business

Date Written: July 30, 2017

Abstract

This study investigates the anticipated and the actual use of capital raised from initial public offering (IPO) in Malaysia. The descriptive analysis shows that companies anticipate the use of capital mainly for growth opportunities (47%), working capital (27%), debt repayment (12%) and listing expenses (13%). Further analysis indicates that 54% of IPO companies have dedicated more than 50% of the amount of capital raised for growth opportunities. Very few companies planned to use the capital raised for research and development (R&D) and marketing activities. The regression results also confirm that the anticipated use of capital for R&D and marketing have no significant relationship with total amount of capital raised. In addition, a content analysis of the chairmen’s statements and the section dedicated for actual use of capital raised in the annual reports reveal that majorly 73 out of 121 companies’ exhibit changes in the anticipated use of capital raised. Therefore, this study concludes that relevant parties in the IPO process (e.g., regulators, issuers, financial intermediaries and investors) should pay close attention to the anticipated and actual use of capital raised.

Suggested Citation

Badru, Bazeet and Ahmad-Zaluki, Nurwati A. and Wan-Hussin, Wan Nordin, Anticipated and Actual Use of Capital Raised in Malaysian IPO Market (July 30, 2017). Studies in Business Economics, Vol. 19, No. 1, Spring 2016, Available at SSRN: https://ssrn.com/abstract=3010925

Bazeet Badru (Contact Author)

School of Economics, Finance and Banking. Universiti Utara Malaysia ( email )

Universiti Utara Malaysia
Sintok, Kedah 06010
Malaysia
+60147265986 (Phone)

Universiti Utara Malaysia. ( email )

Sintok, Sintok 06010
Malaysia
+60147265986 (Phone)

Nurwati A. Ahmad-Zaluki

Universiti Utara Malaysia - Othman Yeop Abdullah Graduate School of Business ( email )

Universiti Utara Malaysia
Sintok, Kedah 06010
Malaysia

Wan Nordin Wan-Hussin

Universiti Utara Malaysia - College of Business ( email )

Sintok, Kedah Darul Aman 06010
Malaysia
+604-7003939 (Phone)
+604-7005762 (Fax)

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