Going Public: Key Factors to Consider by IPO Candidates on Emerging Markets of Poland and the Czech Republic

Abstract

Increasing globalization contributes to the growing role primary capital markets play for raising external equity capital. This phenomenon is becoming more significant in both developed and emerging markets and influences the effectiveness of national economy. Therefore, the identification of going public motivations can be a source of knowledge for enterprises, stock exchanges, investment banks and national macroeconomic policy makers. In this paper, we aim to document the sentiments toward going public expressed by 45 CFOs of not public and not financial companies – IPO candidates - from the Czech Republic and Poland in the period between 2012 and 2014. These markets belong to the most important among the Central and Eastern European countries. In the statistical analysis descriptive methods, contingency tables and chi-square test were applied. Results are compared with academic literature and empirical evidence for developed US and EU capital markets. The survey results can be summarised as follows. First, a considerably larger number of CFOs (IPO candidates) is motivated by raising external equity capital. Surveyed companies tend to conduct an IPO in the expansion stage of their life cycle, which is perceived as a positive signal, especially for the investors. Second, our assumption a company listing on the capital market will have a positive effect on its image and publicity could be confirmed by empirical evidence. Next, analysing conditional variables revealed some other insights into the strategy of corporate financing. Polish companies are more likely to conduct an IPO than their Czech counterparts and at the same time raising external equity capital is the prevailing reason for conducting an IPO in Poland while this motive is significantly less important for Czech CFOs. Furthermore, there is no evidence that older firms might have a greater tendency to go public. However, more mature companies prefer using the funds raised by IPO to pay down debt, which corresponds to the results of previous studies conducted in continental Europe. The motive of lowering the cost of capital prevails in small companies as well as another non-financial IPO driver, publicity and image enhancement.

DOI: http://dx.doi.org/10.5755/j01.ee.27.4.14755