互联网上市公司的盈利能力分析-外文资料翻译.docx
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1、The path-to-profitability of Internet IPO firmsBharat; Narayanan; OmeshAbstractExtant empirical evidence indicates that the proportion of firms going public prior to achieving profitability has been increasing over time. This phenomenon is largely driven by an increase in the proportion of technolog
2、y firms going public. Since there is considerable uncertainty regarding the long-term economic viability of these firms at the time of going public, identifying factors that influence their ability to attain key post-IPO milestones such as achieving profitability represents an important area of rese
3、arch. We employ a theoretical framework built around agency and signaling considerations to identify factors that influence the probability and timing of post-IPO profitability of Internet IPO firms. We estimate Cox Proportional Hazards models to test whether factors identified by our theoretical fr
4、amework significantly impact the probability of post-IPO profitability as a function of time. We find that the probability of post- IPO profitability increases with pre-IPO investor demand and change in ownership at the IPO of the top officers and directors. On the other hand, the probability of pos
5、t-IPO profitability decreases with the venture capital participation, proportion of outsiders on the board, and pre-market valuation uncertainty.Keywords:Initial public offerings, Internet firms, Path-to-profitability, Hazard models, Survival1. Executive summaryThere has been an increasing tendency
6、for firms to go public on the basis of a promise of profitability rather than actual profitability. Further, this phenomenon is largely driven by the increase in the proportion of technology firms going public. The risk of post-IPO failureis particularly high for unprofitable firms as shifts in inve
7、stor sentiment leading to negative market perceptions regarding their prospects or unfavorable financing environments could lead to a shutdown of external financing sources thereby imperiling firm survival. Therefore, the actual accomplishment of post-IPO profitability represents an important milest
8、one in the companys evolution since it signals the long-term economic viability of the firm. While the extant research in entrepreneurship has focused on factors influencing the ability of entrepreneurial firms to attain important milestones prior to or at the time of going public, relatively little
9、 is known regarding the timing or ability of firms to achieve critical post-IPO milestones. In this study, we construct a theoretical framework anchored on agency and signaling theories to understand the impact of pre-IPO factors such as governance and ownership structure, management quality, instit
10、utional investor demand, and third party certification on firms post-IPO path-to-profitability. We attempt to validate the testable implications arising from our theoretical framework using the Internet industry as our setting. Achieving post-issue profitability in a timely manner is of particular i
11、nterest for Internet IPO firms since they are predominantly unprofitable at the time of going public and are typically characterized by high cash burn rates thereby raising questions regarding their long-term economic viability. Since there is a repeated tendency for high technology firms in various
12、 emerging sectors of the economy to go public in waves amid investor optimism followed by disappointing performance, insights gained from a study of factors that influence the path-to-profitability of Internet IPO firms will help increase our understanding of the development path and long-term econo
13、mic viability of entrepreneurial firms in emerging, high technology industries.2. IntroductionThe past few decades have witnessed the formation and development of several vitally important technologically oriented emerging industries such as disk drive, biotechnology, and most recently the Internet
14、industry. Entrepreneurial firms in such knowledge intensive industries are increasingly going public earlier in their life cycle while there is still a great deal of uncertainty and information asymmetry regarding their future prospects (Janey and Folta, 2006). A natural consequence of the rapid tra
15、nsition from founding stage firms to public corporations is an increasing tendency for firms to go public on the basis of a promise of profitability rather than actual profitability.3 Although sustained profitability is no longer a requirement for firms in order to go public, actual accomplishment o
16、f post-IPO profitability represents an important milestone in the firms evolution since it reduces uncertainty regarding the long-term economic viability of the firm. In this paper, we focus on identifying observable factors at the time of going public that have the ability to influence the likeliho
17、od and timing of attaining post-IPO profitability by Internet firms. We restrict our study to the Internet industry since it represents a natural setting to study the long-term economic viability of an emerging industry where firms tend to go public when they are predominantly unprofitable and where
18、 there is considerably uncertainty and information asymmetry regarding their future prospects.4The attainment of post-IPO profitability assumes significance since the IPO event does not provide the same level of legitimizing differentiation that it did in the past as sustained profitability is no lo
19、nger a prerequisite to go public particularly in periods where the market is favorably inclined towards investments rather than demonstration of profitability (Stuartet al., 1999; Janey and Folta, 2006). During the Internet boom, investors readily accepted the mantra of “growth at all costs” and ent
20、husiastically bid up the post-IPO offering prices to irrational levels (Lange et al., 2001). In fact, investor focus on the promise of growth rather than profitability resulted in Internet start-ups being viewed differently from typical new ventures in that they were able to marshal substantial reso
21、urces virtually independent of performance benchmarks (Mudambi and Treichel, 2005).Since the Internet bubble burst in April 2000, venture capital funds dried up and many firms that had successful IPOs went bankrupt or faced severe liquidity problems (Chang, 2004). Consequently, investors attention s
22、hifted from their previously singular focus ongrowth prospects to the question of profitability with their new mantra being “path-to- profitability.” As such, market participants focused on not just whether the IPO firm wouldbe able to achieve profitability but also “when” or “how soon.” IPO firms u
23、nable to credibly demonstrate a clear path-to-profitability were swiftly punished with steeply lower valuations and consequently faced significantly higher financing constraints. Since cash flow negative firms are not yet self sufficient and, therefore, dependent on external financing to continue to
24、 operate, the inability to raise additional capital results in a vicious cycle of events that can quickly lead to delisting and even bankruptcy.5 Therefore, the actual attainment of post-IPO profitability represents an important milestone in the evolution of an IPO firm providing it with legitimacy
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