WHY FIRMS GO PUBLIC? IPO AND DEBT MATURITY OF INDONESIAN FIRMS

• Main Author: Aulia Andriana, Sarah
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/72412
• Institution: Institut Teknologi Bandung

The event of Initial Public Offering is a big step in a life cycle of a company because this is the time when company evolves from being a private to public firms by raising additional source of financing. Numerous researches have studied the effect of IPO to equity side of financing, whereas the impact to debt financing in the capital structure is not studied as thoroughly even though debt maturity structure would also be impacted by the decision to go public. It is important to inspect the choice of debt maturity in Indonesia’s firms for past research finds that debt maturity has an important role in emerging markets’ macroeconomic condition. Based on the literature reviews, it is expected that companies increase the debt with longer maturity post-IPO because it would be more accessible and beneficial for the newly listed firms. The sample is Indonesian listed companies that have undergone IPO from 2008 to 2011. The results show that one year and two year after the IPO event, the decision to go public affects the choice of debt maturity structure in Indonesia by increasing the use of long-term debt. The firm’s asset maturity, leverage, and growth opportunity are also found to be associated with the debt maturity. This is the first study that investigates the relationship of IPO and debt maturity of Indonesian firms. This research will also contributes to the study of capital structure choices in emerging markets.