Determinants of IPO survival on the Johannesburg securities exchange

Abstract

The purpose of this paper was to establish the determinants of IPO survival on the Johannesburg Securities Exchange (JSE). Using the Kaplan-Meier test, this study established that firms less than five years prior to listing on the JSE have a significant smaller mean survival time; firms with a gross proceed less than the median have a significant shorter mean survival time; overpriced IPOs have a significant higher survival time; IPOs listed during the hot market period on the JSE have a significant smaller mean survival time and IPOs with return on asset, operating profit margin, and return on equity less than or equal to zero have a low mean survival time. Also, being in the internet industry significantly shortens the mean survival time of an IPO. Moreover, based on the Cox Proportional Hazard model, it was established that the determinants of IPO survivability on the JSE are the firms’ age, size, market period, return on equity and operating profit margin are. These findings provide investors and companies in the JSE with empirical evidence of the determinants of IPO survivability of the JSE. As such, investors are advised to consider these factors when selecting their portfolios.