Open AccessInitial Performance of IPOs and the Bankruptcy Risk: A Comparison of Internet Firms and the Traditional Firms
Author(s) -
Nguyen Nguyen Quang My,
Peter Kim,
Mustafa Sayım
Publication year - 2015
Publication title -
research in business and management
Language(s) - English
Resource type - Journals
ISSN - 2330-8362
DOI - 10.5296/rbm.v2i2.7811
Subject(s) - initial public offering , bankruptcy , business , the internet , investment (military) , accounting , finance , monetary economics , economics , politics , world wide web , computer science , political science , law
This study examines whether Internet Firms’ IPOs have more of a tendency to fail than Traditional Firms’ IPOs. IPO issue has long been known as an interesting yet complicated topic to explore. There are heated debates on whether Internet Firm IPOs outperform or underperform Traditional Firm IPOs. In other words, whether investment risks associated with Internet Firms are different than Traditional Firms? Should investment decision-making process be different for Internet Firms than Traditional Firms? In this study, Internet Firms are defined as companies that are providing goods and services through Internet. Furthermore, all other types of companies are considered as Traditional Firms. The Z-score formula for predicting bankruptcy of Altman (1968) was utilized. Then the two-way factorial ANOVA was conducted with the type I error as 0.05 to test the Z-Score across 12 quarters from January 2012 to December 2014. The findings revealed that both Internet Firms and Traditional Firms generally had similar risks as no one type of firms showed significantly higher risks than the other.