other generally found that there is a declining in the operating performance in the period after the company’s IPO. The company’s inability to maintain the
operating performance achieved in the period before the IPO is likely caused by the actions that lead to improved profitability.
2.3 Conceptual Framework
Based on the theoretical study shown previously, it can be described in the conceptual framework of this study is as follows.
Go Public Capital Market
Figure 2.1 Conceptual Framework In conducting business, the company will need funds. One alternative that
can be selected by the company to meet the needs of their funds is by going public or making an initial public offering through the stock market. This needs to be
done to get conclusions about the condition of the company before and after going public.
Operating performance would indicate that the companys market performance can be measured by reviewing the companys stock price in the
capital market. Through the stock price and the market index can be calculated abnormal return when the company is going public. Operating performance of the
company after going public is expected to be better than the operating
Abnormal Return Stock Prices and
Market Index Public Company
Company
Financial Statements before and after IPO
Comparison of the operating performance ratios, such as:
1. Operating Return on Assets
2. Operating Cash Flow to Total Assets
3. Sales Growth
4. Total Assets Turnover
performance when the company do the first offering because the company has secured additional capital from IPO activity.
To analyze the operating performance, this study uses operating performance ratios covering operating return on assets, operating cash flow over
total assets, sales growth, and total asset turnover. From these ratios it can be compared the performance to determine if there are differences between the
companys operating performance before and after the IPOgo public. Then it can be concluded whether the operating performance is steady, improving or
decreasing. The results of the companys operating performance comparisons before and
after going public would be very important information for the capital market. It can be used as one of considerations in determining the strategy of investing in the
stocks of IPO firms.
2.4 Hypotheses
