This study investigates the relationship between the intended use of proceeds of initial public offerings (IPOs) and the long-run stock performance of companies listed on Borsa Istanbul between 2013 and 2022. Using hand-collected prospectus data, we divide IPO firms into three subsamples: investment (INVEST), debt repayment (DEBT), and working capital (WC). Our results indicate that their post-IPO behavior is largely consistent with their stated intentions. INVEST firms have stronger asset growth and higher capital expenditure. WC firms increase their working capital, whereas INVEST firms also increase working capital, consistent with the operational requirement of post-investment growth. DEBT and WC firms reduce leverage at issuance. However, this effect is not persistent, and WC firms relever over time, consistent with the market timing and dynamic capital structure theories. Stock performance differs systematically across subsamples. INVEST firms have strong abnormal returns over six-month to two-year horizons, but WC firms have only short-term gains. DEBT firms have weak and nonpersistent short-term performance and underperform WC firms in initial returns. Our multivariate findings indicate that improvement in operating performance explains abnormal returns only partially, but it is insufficient. INVEST firms continue to outperform after firm characteristics, industry effects, and post-IPO changes in operating performance are controlled for, which suggests that use of proceeds disclosures have signaling value. Overall, the study provides new evidence from an emerging market setting, highlighting the central role of IPO disclosures, in particular the intended use of proceeds, in shaping firm behavior and investor outcomes.
AYYILDIZ et al. (Mon,) studied this question.