Managers’ Bait-and-Switch Tactics in the Malaysian Initial Public Offerings Market

The Importance of New Technologies and Entrepreneurship in Business Development: In The Context of Economic Diversity in Developing Countries: T. 1023-1031). Springer International Publishing; 2021

9 Pages Posted: 8 Apr 2021

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

Date Written: March 30, 2021

Abstract

Studies have shown that initial public offerings (IPOs) issuers’ intended use of IPO proceeds could provide insights into the motives for IPOs, however, whether or not issuers deviate from the stated use as disclosed in the prospectus remains unexplored. Therefore, this study used a sample of Malaysian IPO companies to investigate whether the actual use of IPO proceeds differs from the intended use of capital raised as stated in the prospectus. Based on the content analysis of IPO companies’ annual reports, 27 out of the 121 companies examined were unable to explain how the proceeds raised were applied. A total of 73 out of 121 companies exhibited changes in the intended use of capital raised, while 21 companies used the IPO proceeds exactly as intended. Noticeably, 20 out of the 73 companies sought for board approval for changes in the use of capital raised as stated in the prospectus. Therefore, there is indication that IPO issuers do change their intended use of IPO proceeds after listing on Bursa Malaysia. The implication of this is that the market may react to such changes and the post-IPO performance may be at stake. Therefore, future studies should examine how IPO companies’ performance is influenced by the intended and actual use of capital raised as this may help regulators and market participants to monitor its actual use.

Keywords: Growth opportunities · IPO proceeds · Use of IPO proceeds · Malaysia

Suggested Citation

Badru, Bazeet and Ahmad-Zaluki, Nurwati A., Managers’ Bait-and-Switch Tactics in the Malaysian Initial Public Offerings Market (March 30, 2021). The Importance of New Technologies and Entrepreneurship in Business Development: In The Context of Economic Diversity in Developing Countries: T. 1023-1031). Springer International Publishing; 2021, Available at SSRN: https://ssrn.com/abstract=3815416 or http://dx.doi.org/10.2139/ssrn.3815416

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

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