The influence of market timing and investor sentiment on the performance of IPO firms in Malaysia

Zalina Zainudin, Zarina Mohd Zaki, Rasidah Mohamad Said, Abdul Razak Abdul Hadi, Hafezali Iqbal Hussain

Research output: Contribution to journalArticle

Abstract

The dynamics of raising capital, the Initial Public Offering (IPO) firm performance, and the intention to re-issue equity capital immediately after the listing of IPO firms are still widely unknown within the contexts of emerging economies. Compared to other existing research on emerging countries, this present study envisages that market sentiment helps to form the demand for capital to take advantage of changes of market condition. Hence, alongside the conventional financial variables, this study aims to examine the influence of market timing and investor sentiment on the performance of the firms that raise capital immediately after initial public offerings. Using balanced panel data from 143 Malaysian IPOs listed on Bursa Malaysia for the period of 2004 to 2015, this study utilized the static framework to provide insight on IPO firm performance and the relationship with the market timing and investor sentiment. Timing is also considered, and is proxied by returns of the IPOs from three different dimensions. Investor sentiment was measured by the sentiment index, which was developed based on three IPOs proxies while the variables and relationships were controlled for growth, profitability, tangibility, size, and industry classification. The result of this study indicates that there is a significant positive relationship between timing and firm performance. It supports the market timing theory, whereby, managers will consider firm value, undervaluation, or overvaluation in their equity issuance or financing decision. Firm performance has an insignificant, negative link with tangibility, and a negatively significant link when timing proxy is in excess return. Firm performance has a positive significant relationship with growth opportunities and profitability. Consistent with previous studies, the result of this study supports the notion that firms tend to underperform when sentiment is high and vice versa. The findings of this study would be a suitable reference for firm managers and investors to strategize for new issuances and investment decisions, respectively.

Original languageEnglish
Pages (from-to)158-189
Number of pages32
JournalInternational Journal of Innovation, Creativity and Change
Volume6
Issue number9
Publication statusPublished - 1 Jan 2019

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investor
Malaysia
firm
market
performance
profitability
equity
Investors
Sentiment
manager
economy
industry
demand
Profitability
Managers
Equity

Keywords

  • Financial performance
  • Investor sentiment
  • IPOs
  • Market timing

ASJC Scopus subject areas

  • Education
  • Arts and Humanities (miscellaneous)

Cite this

The influence of market timing and investor sentiment on the performance of IPO firms in Malaysia. / Zainudin, Zalina; Zaki, Zarina Mohd; Said, Rasidah Mohamad; Hadi, Abdul Razak Abdul; Hussain, Hafezali Iqbal.

In: International Journal of Innovation, Creativity and Change, Vol. 6, No. 9, 01.01.2019, p. 158-189.

Research output: Contribution to journalArticle

Zainudin, Zalina ; Zaki, Zarina Mohd ; Said, Rasidah Mohamad ; Hadi, Abdul Razak Abdul ; Hussain, Hafezali Iqbal. / The influence of market timing and investor sentiment on the performance of IPO firms in Malaysia. In: International Journal of Innovation, Creativity and Change. 2019 ; Vol. 6, No. 9. pp. 158-189.
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