Key factors include pre-IPO firm fundamentals (profitability, leverage, and growth prospects), macroeconomic conditions, underwriter reputation, and investor sentiment. Additionally, governance structures and the purpose of IPO proceeds influence post-IPO firm performance. Empirical studies have shown that firms with strong pre-IPO profitability and transparent disclosures tend to perform better in the long run.
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Ayodeji Bamidele Owoeye
Firm performance during IPOs is influenced by a blend of internal and external factors. Internally, robust pre-IPO fundamentals—such as consistent profitability, manageable leverage, and solid growth prospects—signal financial health and reduce information asymmetry, making firms more attractive to investors. Effective corporate governance and transparent disclosures further strengthen investor confidence, while the intended use of IPO proceeds (e.g., growth investments vs. debt repayment) can affect long-term strategic positioning.
Externally, macroeconomic conditions (like interest rates and market volatility) and the reputation of underwriters play critical roles. A reputable underwriter not only adds credibility but also ensures wider investor reach and more accurate valuation. Additionally, investor sentiment and market timing are powerful drivers; firms that go public during bullish periods often experience higher initial returns, though these may not always sustain.
Empirical evidence suggests that firms aligning strong internal metrics with favorable external conditions tend to outperform post-IPO. However, misalignment—such as going public during economic uncertainty or relying on hype over substance—can undermine long-term performance.
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