Why do companies go public in Sri Lanka? A mixed-method approach

Abstract

Purpose

This study aims to explore the motives behind the company’s decision to go public in Sri Lanka.

Design/methodology/approach

This study adopts the explanatory sequential mixed-method approach based on the benefit-cost trade-off theory, incorporating survey-based descriptive statistics of 143 respondents from listed companies in the Colombo Stock Exchange (CSE) followed by content analysis of 52 initial public offering prospectuses and 11 interviews with top management of listed companies.

Findings

Companies primarily go public to raise capital for long- and short-term growth, followed by enhancing corporate image and governance structure. Also, they go public to rebalance capital structure, lower the cost of capital, diversify risk, compete in their product market and grab market timing opportunities. Furthermore, the qualitative analysis established that companies are going public also for value addition, broadening the ownership structure, establishing new strategic partnerships and funding for working capital requirements, which are not highlighted in previous studies.

Practical implications

These findings offer valuable insights for policymakers aiming to attract new companies to CSE, which would contribute to the capital market development of Sri Lanka.

Originality/value

This study combines quantitative survey and qualitative content analysis in a single investigation, revealing novel motives for going public that were not previously identified. This approach allows for a more comprehensive topic exploration, including the participants’ experiences and perceptions, while minimizing bias and maximizing robustness. This study is more comprehensive than previous studies that relied on descriptive statistics.

Citation

Mohamed Riyath, M.I. and Indunil Dayaratne, D.A. (2024), "Why do companies go public in Sri Lanka? A mixed-method approach", Qualitative Research in Financial Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/QRFM-06-2023-0141