Formulation of the Problems Research Objectives Research Benefits

1.2 Formulation of the Problems

There is a significant information asymmetry between issuers and investor at the IPO. Rao 1993 stated that there was no news about issuing firms in the media until one year before the issue date. In the case of IPO’s, usually there is little information about the private firm that is available to the public. Investor has to rely primarily on the financial statements in the prospectus, which it gives the issuers and the underwriters can incentive to report favorable accounting numbers. This leads to the IPO firms have to improve in profitability after the offering. Therefore, it is necessary to analyze the stock performance and the company’s operating performance before and after going public in order to know whether going public is an interest issue to investors and whether going public could increase the company’s operating performance. Results of these comparisons can evaluate the success of the company after going public. Based on the description above, the research problems are: a. Is there any abnormal return after going public? b. Are operating performance ratios covering operating return on assets, operating cash flow on total assets, sales growth, and company total asset turnover improving after going public?

1.3 Research Objectives

Based on the formulation of the problem, the objectives of this research are: a. To examine whether there is abnormal return after going public. b. To test whether operating performance ratios covering the operating return on assets, operating cash flow on total assets, sales growth, and total asset turnover company went public after better than before going public

1.4 Research Benefits

Research on company performance analysis before and after going public in Indonesia stock exchange is expected to provide some benefits to some parties, namely the next researcher and investor. a. For the investor This study is expected to be an input and information to investor in order to build a strategy and investment decisions by the company making IPO. b. For the next researcher This study is expected to be a reference for developing future studies related to the company’s performance before and after going public in the Indonesia Stock Exchange. 6

CHAPTER II LITERATURE REVIEW