A Study On China's Private Companies' Pre-and Post-IPO Performance

In recent years, both domestic and foreign scholars have made great efforts to study the private companies in terms of organization structure, company governance and market value. Many management theories and models have been demonstrated and tested in these private companies. However, research related to private companies IPO issues is relatively few.This paper focuses on the financing and initial public offering activities of China's private companies. Based on the previous research related to Initial Public Offerings issues, the paper examines the change of the firm performance, which includes the profit ability, the gain ability, the repay ability, and the cost control ability pre- and post- IPO. Using quantitative analysis method, the paper tests whether firm performance changed after the companies went public, whether the change is positive or negative, and whether it is a good choice for private companies to go public or not.In the first place, the research introduces the outline of the paper, the methods adopted, and reviews previous literatures related to IPO issues. On the basis of China's economic situation and prior research, this paper tries to find out insufficiencies of previous research and creates original points. This paper defines the theories and concepts quoted in this research and related to IPO problems, and illustrates the development of Chinese private companies, the characteristics of the internal and external structure of private companies as well as the development and status quo of Chinese capital maket.In the second place, this paper uses the financial data reported by China's private listed companies and statistical analysis skills to test the theories and hypotheses. The research collects all required data from 2000 to 2002, examines the profit ability, the gain ability, the repay ability, and the cost control ability for all sampling listed companies by using Paired-Samples T test in the quantitative analysis section. The results show that these listed companies'profit decreases, income increases, repay ability enhances after the companies go public. Finally the paper takes the non-operating expenses as the illustrating index for the cost control capability of the companies to demonstrate that there is an obvious increase of non-operating expenses after getting great amount of money in IPO, in this sense it can be stated that there is the intendancy of low capital utility rate in private companies.This research also classifies all samples into four categories by industry, lifecycle, firm size, and financing amount in order to find out whether the financial performance including the profit ability, the gain ability, the repay ability, and the cost control ability indicators are different among all companies. The paper uses Analysis of Variance method to examine the difference of the performance indicators mentioned above among companies with different properties. The result suggests that companies with different ages do not have any difference in those four ability indicators. But many differences do exist when companies belongs to different industries, firm size, and financing amount groups. This finding indicates that the decrease of the firm performance is affected by other factors and companies with different properties would decrease to different extents.In conclusion, this paper lists several significant factors that caused the change pre- and post- IPO and gives some advisable suggestions and proposals to those have not gone public yet as well as the listed companies. This research recommends that Chinese private companies to consider the results of this study, think over IPO activities, and improve their strategies for management and investment.