This paper investigates the determinants of survival for French high technology firms that have gone public at the Euronext stock exchange from 1996 through 2004. Conducting survival analyses using logit regressions, Kaplan Meier and Cox methodologies, the current research proves that theintellectual capital quality improves the survival profiles of IPO firms. This quality capital seems more useful to predict the survival or failure of French high technology firms compared to classic explanatory variables of the literature.
KEYS WORDS: Survival analysis, IPO, intellectual capital, High technology firms. JEL CLASSIFICATIONS:G33, C34
* Lecturer at Institut Telecom /TELECOM &Management sudParis/ Associate Resercher at DRM-CEREG (UMR 7088); Paris Dauphine University. Corresponding: TELECOM & Management sudParis ; 9 Rue Charles Fourier ; 91011 Evry Cedex ; Yosra.Bejar@it-sudparis.eu.
In recent years, a big evolution of investors’ needs in financial information was recorded. Recent reports (AICPA 1994; FASB 2001; SFAF & EURONEXT 2002…) and recommendationsin academic and theoretical literature (Beattie & Pratt, 2002a, 2002b; Eccles & Mavrinac, 1995; Eccles et al. 2001a; Lev, 2001; Holland, 1997…) have argued that demand for external communication or information on knowledge-based resources is growing as companies increasingly base the value of their company on know-how, patents, skilled employees, customers… and other intangibles. The importance ofsuch communication on initial public offering prospectuses was underlined. Buck & al (2003) argue that firms desiring access to capital markets take particularly care of its prospectus to answer the investors’ expectations. Moreover, Jenkinson & Ljungquist (2001) underline the multiplication of organized meeting, between investment banks and potential investors, trying to account for investors’information needs before finalising an IPO prospectus. As a result “an IPO
prospectus usually contains more information about future expectations regarding markets developments and earnings, strategic direction and intent, management and board composition, etc., compared to annual report” (Buck et al., 2003,p.5).
This demand for external communication became more important after the burst ofthe internet bubble in the beginning of 2000. Many researchers in different areas such
as accounting, finance, information systems, economics… examine firms’ characteristics and specifically those of high tech firms to explain firms’ post IPO performance.
In major cases, theses studies focus on the valuation of issuing firms (for instance
Bartov et al, 2002; Johnston and Madura, 2002;Ljungqvist and Wilhelm, 2003; Loughran and Ritter, 2003; Wilbon, 2003)1, and ignore the status of firms (survival or
failure) in the aftermarket as an indicator of performance. However, the ultimate performance parameter, particularly for small to medium-sized firms such as those of the French market, is the survival of the enterprise over time.
For a review, see Ritter, J. R., & Welch, I.(2002).
Several questions regarding the survival of technology firms and its determinants need to be answered, namely, do these surviving firms have a specific Know-how and developed intangibles? Does their innovative profile have a specific impact on survival probability? What type of observable characteristics at the time of the IPO can one take into account to predict the status ofsurviving firms in the aftermarket? To my knowledge, only Wilbon (2002) explores these questions by studying the impact of some intellectual capital proxies (such as R&D expenditure, experienced senior executives, intellectual property rights…) on technology firm survival. Using logistic regression analysis, he shows that some of these proxies have a positive impact on high-technology firms’ survival....