The Real Effect of Primary and Secondary Equity Markets on Firm Performance: Evidence from Indonesia

Andriansyah, Andriansyah (2017): The Real Effect of Primary and Secondary Equity Markets on Firm Performance: Evidence from Indonesia. Published in: International Journal of Managerial Finance , Vol. 4, No. 13 (2017): pp. 397-418.

Abstract

The purpose of this paper is to investigate the real effects of primary and secondary equity markets on the post-issue operating performance of initial public offering (IPO) firms. This paper utilizes the intended use of proceeds as a proxy variable for the primary market and the investment-to-price sensitivity and the informativeness of stock prices as alternative proxy variables for the secondary market. The compositional data, and non-parametric quantile regressions which are more robust to outliers than standard least square regressions, are employed for the Indonesian equity market over the period of 1999-2013. While confirming that a firm operating performance can be explained by the firm’s motivation to go public, this paper also shows that the operating performance is positively affected by investment-to-price sensitivity and negatively affected by stock price informativeness. Stock prices affect investment decisions in the way that the more liquid a stock is, the more informative its price is, and the more relevant stock prices are in investment decisions. These findings still hold after controlling for ownership structure.

• Item Type: MPRA Paper
• Language: English
• Keywords: The primary market, The secondary market, Firm performance, Indonesia
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors

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