Data Proceeding E Book 4A Turky

593 Infrastructure, Utilities Transportation 1 1 2 4 Trade, Services Investment 10 7 3 1 21 Total 7 21 13 2 6 4 53 Table 1 above shows that the final samples of this study mostly consist of firms from Trade, Services, Investment sector. This sector counts for more than 39 21 out of 53 IPOs of the total sample. The smallest numbers of IPOs come from the Agriculture and Consumer Goods Industry, which are only around 2 1 out of 53 IPOs. Moreover, the final samples in this study are dominated by IPOs done in the period of 2001, which are also made up of more than 39 21 out of 53 IPOs of the total IPOs across the sample periods. Year 2003, however, is the period with the least number in the sample. Only around 4 2 out of 53 IPOs comes from year 2003. Table 2 Descriptive Statistics Mean Min. Max. Std. Dev. ROA 7 -124 254 39 Leverage 1.57 0.00 69.87 9.59 Size IDR billion 326 10 6,474 937 ROA is calculated by dividing a company‘s annual net income by its total assets, in a year before IPO. Leverage is calculated by dividing a company‘s long term debt by its equity, in a year before IPO. Size is the value of the total assets prior to the IPO year, expressed in Indonesian Rupiah IDR billion. Table 2 above shows that IPO companies in this study one year before going public, on average, book for 7 in their ROA, with the maximum and minimum of 254 and -124, respectively. PT Multistrada Arah Sarana Tbk was the company that had the highest ROA prior to its IPO in 2005. On the other hand, PT Metamedia Technologies Tbk was the company with the lowest ROA prior to its IPO in 2001. Furthermore, table 2 above also shows that the sample IPO companies have varying levels of leverage. The average 594 leverage of the sample IPO companies is 1.57 with the maximum and minimum of 69.87 and 0, respectively. The company that is highly levered was PT Aneka Kemasindo Utama Tbk, prior to its IPO in 2004. In contrast, there were four companies with zero leverage and all of them took the IPO in 2001. It can also been seen on Table 2 above that the average size of the sample firms is around IDR 325 billions with maximum and minimum size of approximately IDR 6,474 billions and IDR 10 billions, respectively. The company that has the largest size was PT Excelcomindo Pratama Tbk and the one with the smallest size was PT Integrasi Teknologi Tbk. To investigate the use of IPO raised funds by Indonesian firms, this study needs the data from the 53 IPO firms in the final sample to calculate their Working Capital Requirements WCR, Gross Property, Plant, and Equipment PPE, Net Liquid Balance NLB and Long Term Debt Leverage one year before and one year after the IPO. The formulas to calculate those variables are as follow: PPE = Gross Property, Plant, and Equipment. WCR = Spontaneous Operating Assets – Spontaneous Operating Liabilities = Accounts Receivable + Inventory + Prepaids – Accounts Payable + Accruals. NLB = Cash and Cash Equivalents – Short Term Debt. = Cash + Marketable Securities – Notes Payable + Current Maturities of Long Term Debt. Leverage = Long Term Debt Total Assets. As in Kim and Weisbach 2005, 2006, the four variables above are measured using the change in each variable normalized by total assets one year prior to the IPO. The formulas are as follow: {V T+1 – V T-1 } total assets T-1 595 Where, V = Variable being measured = WCR, PPE, NLB, or LTD, T = The IPO year. 3. How Do Indonesian Firms Use Their IPO Raised Funds? It is mentioned in the Introduction section that the main objective of this study was to empirically examine the motivations of the Indonesian companies in conducting IPO. To investigate motives for Indonesian companies to go public, this study compared the changes in Working Capital Requirement WCR, Gross Plant, Property and Equipment PPE, Net Liquid Balance NLB and Leverage of IPO firms from one year prior the IPO year to one year after the IPO year. Financial flexibility is represented by NLB and Leverage, while Investment is proxied by PPE and WCR. As noted by Kim and Weisbach 2005, raising capital has been an important motive in the going public decision of a company. The IPO funds, as a source of equity capital, can be utilized in two forms, first to finance its future growth, andor secondly, to increase financial flexibility as in enhancing liquidity and in reducing debt. Mikkelson, Partch, Shah 1997 provide evidence that one of the motivation of a company to go public is to raise equity capital to finance future growth. They documented that US IPOs are generally followed by a large growth in assets. Using a sample of 16,958 IPOs from 38 countries between 1990 and 2003, Kim Weisbach 2006 also find that the equity capital raised from IPO is used for future investment. In contrast, a study carried out by Pagano, Panetta, Zingales 1998 demonstrate that the motivation for Italian companies to go public is not to finance future investments and growth, but rather to rebalance their leverage after a period of high investment and growth. They argue that an Italian 596 company to go public is to rebalance its leverage in order to increase its financial flexibility. On the other hand, enhancing liquidity is as important as reducing debt in a compan y‘s capital structure. Companies may have less debt in their capital structure, but the ability to fulfill its financial obligation when it dues depend on whether or not it has sufficient cash and cash equivalents. To ensure the avoidance of future financial distress, IPO companies may use the raised fund to fortify their liquidity. Regardless the choice of debt reduction or liquidity enhancement, IPO companies can get benefit of avoiding future financial distress, by increasing its financial flexibility. Table 3 Kolmogorov-Smirnov Tests on the Normality Assumptions on the Changes in Leverage, PPE, NLB and WCR Variables K-S statistics p-value ΔWCR 2.938 0.000 Δ PPE 1.390 0.021 Δ NδB 2.882 0.000 Δ δeverage 2.468 0.000 The model is {V T+t – V T-1 } total assets T-1. V = variable being measured. WCR is the Working Capital Requirement of the IPO company. PPE is the Gross Property, Plant, and Equipment. NLB is the Net Liquid Balance. δeverage is the amount of δong Term Debt. Δ here represents the difference of the aforementioned variables‘ figures between one year before and one year after the IPO. The changes in the variables are scaled with total assets at the one year before each IPO. Table 3 above presents the results of Kolmogorov-Smirnov K-S test. This goodness of fit test is performed to determine the normality assumptions of the variables used in this study. As can be seen from the table 3 above, the test has consistently and significantly rejected the null hypothesis at least at the 5 level that the utilization of IPO funds in WCR, PPE, NLB, and Long Term Debt are normally distributed. Accordingly, this result puts forward that one cannot put too much faith on the results from parametric tests, the paired-sample t-test, in this study due to violation of the normality assumption on the data. To overcome that normality problem, a non parametric test, the Binomial test, is employed to gauge the differences in the