IPO Financial and Operating Performance: Evidence from the Six Countries of the GCC

This paper investigates the financial and operating performance of 52 IPOs made in the GCC region between 2003 and 2010. The results indicate that IPO performance declines after going public. The performance decline is associated with the firm transition from private into public ownership due to increasing agency costs. Also, we find evidence supports the lack of opportunity theory because the firm’s growth in sales and capital expenditure is much stronger in the pre-IPO period compared to post-IPO period. Nonetheless, we are unable to rule out the possibility that IPO accounting figures might be inflated in the prospectus to make the issue attractive for potential investors. This in turn lends support to the windowdressing explanation of IPO performance decline.