Survivability of IPO Companies in the Malaysian Market. Evidence from the Kaplan-Meier Survival Analysis

This study aims to examine the survivability of IPO companies in the Malaysian market. The importance of this study goes consistent with Bursa Malaysia’s initiatives in establishing the Practice Notes and Guidance Notes frameworks in elongating the survivability of IPO companies. Responding to the urge, this study examines the survival rate of 527 IPO companies listed in Bursa Malaysia from January 2000 to December 2014 (to observe companies' survival until early August 2021) using the Kaplan-Meier (K-M) survival analysis model. This study reports the survival rate of IPO companies in Malaysia to be at 62.81 percent after five years of listing and 56.91 percent after seven years of listing. Past studies have reported a higher survival rate of IPO companies in the Malaysian market. However, the survival rate of IPO companies should vary according to the definition a study adopts in segregating between surviving and non-surviving companies. Further investigation of the KM log-rank test shows that the survival rate of companies differs according to their listing years, sectors and markets. Comparison between the survival rate of the Main Market and ACE Market reveals that over the seven years post-IPO, companies listed in the Main Market have a 7.55 percent higher survival rate than companies listed in the ACE Market over the seven years of the observation period. As such, it is suggestable that future researchers further examine the contributable factors for IPO companies to survive longer post-IPO using other survival analysis methods (semi-parametric or parametric).


Introduction
The first and prominent stage of going public is a company's engagement in an initial public offering (IPO). This stage requires the company to issue shares to the general public for the first time (Che-Yahya & Matsuura, 2021). Apart from fuelling the growth, going public is also one way for a company to convince shareholders of its future survivability in the long-run (Dziczkowski, 2020). The survivability will not only indicate the competitiveness of companies to overcome the brutal market conditions, but it can also signify the ultimate performance of the companies (Baluja & Singh, 2016). Several reasons can disrupt companies' survivability which can either be voluntarily reasons (e.g., merger and acquisition, corporate proposal or conversion to a private firm) or involuntarily reasons (inability of fulfilling listing requirements, liquidation or forced liquidation) (Schultz, 1993;Pour & Lasfer, 2013;Helbing, 2019;Shari, 2019). Despite the grounds on why companies cannot survive longer, the desire to remain viable and sustainable once publicly listed remains the companies' primary goal (Hensler et al., 1997). IPO companies' survival studies involve the occurrence of any specific event of interest. In other words, it focuses on predicting the companies' long-term survivability with the event occurrence (e.g., delisting of companies or unable to fulfil listing requirements) (Ahmad et al., 2021). It is essential to acknowledge that several different definitions of surviving and nonsurviving companies uniquely suit past studies' scope of the examination. Schultz (1993) and Suárez and Utterback (1995) define surviving companies as companies at their ultimate performance. Schultz (1993) posits that surviving companies should perform substantially to fulfil the listing requirements continuously. The study adds that surviving companies should portray adequate ability to convince investors of their prospects. Hensler et al. (1997) add that the current share should also be at par or higher than their IPO offer price or its first-day market price for the companies to be indicated as surviving companies. Peristiani and Hong (2004) suggest that surviving companies must portray a healthy financial performance (e.g., positive return on assets) as a sign of long-term stability. Apart from maintaining a healthy financial performance, surviving companies should also have adequate ability to withstand the market's competitive nature post-IPO (Lamberto & Rath, 2010). As an alternative to portray the growth of the companies, Espenlaub et al. (2016) and Shari (2019) mention that surviving companies can also go through market transferring. Simply put, the ultimate performing companies should not be among those that encounter any hiccups 1 along their journey as listed companies post-IPO. That is, the surviving companies should be rapidly growing regarding their financial credibility and operational activities. Overall, surviving companies could be defined as companies that hold an active status and are at their ultimate performance post-IPO.
The survival of IPO companies carries positive implications because as long as the companies are listed on the Stock Exchange, they can raise capital publicly from the investors. This will enable the companies to finance investment opportunities with high positive net present value and achieve better future success (Andriansyah, 2017). The positive implications of survival extend to other parties such as the investors. Companies that have the capacity to survive longer in the aftermarket will shape a good sentiment from investors as it indicates security for the investors to execute appropriate investments strategies for potential capital appreciation in the long-run (Baluja, 2018). The survival of companies is also crucial to policymakers as they can assess the effectiveness of the rules and guidelines being imposed in the capital market (Gémar et al., 2016). For instance, in the context of the Malaysian market, the initiative of Bursa Malaysia to develop frameworks Practice Note 17 (PN17) and Guidance Note 3 (GN3) to elongate the survival of IPO companies in the Malaysian market shows that companies' survivability carries significant weightage to the policymaker' evaluation for a sustainable capital market. Thus, in view that the survival of IPO companies is crucial to the companies, investors and Bursa Malaysia, it gives a sudden thrust for this study to be conducted.
It has been distinguished that the survival of IPO companies is a debatable issue, and existing literature reveals that the question of how long companies can survive in the emerging market, specifically in Malaysia, is still scarce. One of the few studies in the Malaysian market by Shari (2019) reports that over five years, the survival of IPO companies is at 92.3 percent and 86.8 percent over seven years. Shari (2019) further elaborated that compared to IPO companies' survival in the developed market, the Malaysian market possesses a better chance of surviving longer post-IPO. Shari (2019) also compared the survival of IPO companies between markets and found that the companies listed in the Main Market have better survivability than the ones listed in the ACE Market. In contrast, a more recent study in the Malaysian market by Ahmad et al. (2021) reports that the survival of IPO companies listed in the ACE Market has a higher rate by 10.4 percent compared to the Main Market throughout three years post-IPO. Ahmad et al. (2021) discover a statistical difference in IPO companies' survival between the Main Market and the ACE Market. Other studies in the developed markets have also found IPO companies' survivability to be statistically different according to companies' listing years and sectors (Espenlaub et al., 2012;Ahmad & Jelic, 2014;Bhattacharya et al., 2015;Espenlaub et al., 2016). Conforming to the findings in past studies, this study also intends to compare the survival of IPO companies listed in the Main and ACE Market, identifying whether the IPO companies' survival is statistically different between listing years, sectors and markets.
This study contributes to the survival of IPO companies' literature in several ways. Firstly, this study is one of the few studies investigating post-IPO survival of companies in the Malaysian Market. Understanding that studies on IPO companies' survival have only emerged recently, specifically for the Malaysian market, this study intends to address the scarcity by examining more recent IPO companies listed between 2000 and 2014 (traced until 1 August 2021). Secondly, this study investigates the statistical difference of IPO companies' survival by listing years, sectors and markets. Unlike past studies (Espenlaub et al., 2012;Ahmad & Jelic, 2014;Shari, 2019), who have only found listing years to be statistically different, this study reports that sectors of IPO companies are also highly statistically different for companies' post-IPO survival. In addition, it can act as an additional tool of evaluation or prediction of IPO companies' survivability in the long-run. Thirdly, this study may contribute to several parties, such as the companies to foresee their viability and survivability in achieving their capital motivations and the investors to maximize their wealth through capital appreciation in the long-run. The contribution extends to the policymaker through the alignment of this study's objective and the initiatives of Bursa Malaysia in establishing the Practice Notes and Guidance Notes frameworks, monitoring companies facing financial difficulties and low operating performance to maintain their listing status in Bursa Malaysia.
The rest of this study is organized as follows: Section 2 reviews the past studies on IPO companies' survivability in various markets. Section 3 and 4 describes the data, measurement of IPO companies' survival and methodology employed in this study, respectively. The empirical findings are reported and discussed in Section 5, and Section 6 is the conclusion of this study.

Literature Review
One of the earliest studies on the survival of companies in the area of the IPO market is by Schultz (1993). Schultz (1993), examining the U.S. market, compares how issuance between unit IPOs 2 and share IPOs could differ in the companies' ability to survive. From the sample of 797 companies listed from 1986 to 1988, the study reports that the survival rate ranges from 59 percent to 89 percent for companies issuing unit IPOs and share IPOs. Within three years' observation, companies issuing share IPOs report a higher survival rate due to their size. Using a different sample than in Schultz (1993), Hensler et al. (1997) found the survival rate of 741 companies listed in 1975 to 1984 in the U.S. market is at 72 percent after five years of listing. Hensler et al. (1997) found larger companies to have a better survival post-IPO because of the companies' continuous effort to create profits and extensive resources. To add, Kooli and Meknassi (2007) also examine the survival rate of companies in the U.S. market by employing 6,235 companies listed from 1985 to 2005. The study found that recent companies in the U.S. market five-year survival rate to be lower, at 55 percent.
A study by Jain and Kini (2000), employing 877 companies listed from 1977 to 1990 in the U.S. market, compare the survival rate of venture capitalists (VC) backed companies and nonventure capitalists (NVC) backed companies within five years. The study reports that the survival rate of VC backed companies is higher, at 75 percent, than NVC backed companies at only 70 percent. VC's involvement enhances companies' quality, particularly those producing high technology products, resulting in a higher survival rate. Jain and Kini (2008) rationalize a better chance of companies surviving post-IPO for VC backed companies due to the attention of VCs on the growth of companies that develop complex technologies and emerging products. Hamza and Kooli (2010) also examine the survival rate of VC backed companies. However, the study highlights more on the reputational element of the VCs. Observing three years post-IPO using 6,235 companies listed in 1985 to 2005 in the U.S. market, the study reports a higher survival rate for reputational VC backed companies by 3 percent (90 percent and 93 percent) compared to non-reputational VC backed companies. Similar to Hamza and Kooli (2010), Chou et al. (2013) also examine the survival rate of companies backed by reputational VCs using 2,893 companies listed in 1980 to 2003 in the U.S. market. The study reports a similar companies' survival rate to Hamza and Kooli (2010) three years post-IPO at 93 percent. Extending the observation period of companies' survival rate to five years post-IPO, Chou et al. (2013) found the survival rate of VC backed companies to be lower, at 87 percent.
As for the U.K. market, 2,499 companies listed in the Main Market from 1975 to 2004 offered a higher survival rate than the Alternative Investment Market (AIM) due to the companies' size differential (Gregory et al., 2010). The study observes the companies' survival rate within five years and reports that Main Market's survival rate is as high as 96 percent compared to 91 percent in the AIM. Since smaller size companies are usually younger, the chance of such companies to survive post-IPO shrinks due to the lack of operating experiences (Chancharat et al., 2012). Conforming that smaller companies are prone to having a lower survival rate, Espenlaub et al. (2012) investigate the survival rate only for companies in the AIM Market. Comparing 896 companies with reputable nominated advisors (NOMAD) and other NOMAD listed in 1995 to 2004 within five years of observation, the study found a significant difference between the two types of companies by 22 percent. The study reports a 70 percent survival rate for reputable NOMAD companies and a 48 percent for other NOMAD companies. A more recent study by Ahmad and Jelic (2014) employing 580 companies listed in 1990 to 2006 in the U.K. market focuses on the voluntary lockup 3 period that founders extend post-IPO. Regardless of the sample period, the study reports a slightly higher survival rate, at 69 percent than 59 percent for AIM companies, reported in Espenlaub et al (2012) and Vismara et al. (2012) at 57 percent survival rate for European Main Market companies. Ahmad and Jelic (2014) also show that companies with longer lockup periods have a higher survival rate by 5 percent compared to companies with shorter lockup periods.
A recent study in the developing market by Baluja (2018) analyzes how size explains the survival rate of 3,374 companies in the post-SEBI (Securities and Exchange Board of India) era listed in 1992 to 2011. Similar to Schultz (1993); Hensler et al (1997); and Carpentier and Suret (2011), the study reports that out of 50 percent of companies' five-year survival rate, 64 percent are from larger-sized companies. Shari (2019) is the first study (as per the knowledge of this study) that examines the survival rate of companies in Malaysia. Using 352 IPO companies listed from 2002 to 2010, the study reports a slightly lower survival rate of companies at 92 percent after five years of listing than the average survival rate of other Asia-Pacific countries at 93 percent reported by Espenlaub et al (2016); Shari (2019) extends the observation period to seven years post-IPO and found the survival rate is lower, at 86 percent, but alternatively higher than the survival rate in other markets. The study reveals that the difference in Malaysian survival rate compared to other markets is due to the uniqueness of the Malaysian market having the frameworks of PN17 and GN3. Another study in the Malaysian market using a more recent sample (2002 to 2017) but a shorter observation period (three years) is by Ahmad et al (2021), reporting that the survival rate of IPO companies is at 83 percent. Table 1 summarizes the survival rate of IPO companies reported in past studies.  (Schultz, 1993;Hensler et al., 1997;Peristiani & Hong, 2004;Lamberto & Rath, 2010;Espenlaub et al., 2012) and non-surviving companies, otherwise. This study uses STATA Release 17 software to develop the statistical inference. Following Shari (2019), this study observes companies' survivability over seven years, from the IPO companies' listing date to the end of survival observation this study covers (1 August 2021).

Measurement of IPO Companies' Survival
The IPO companies' survival is the companies' time-to-survive, which is the duration from companies' listing date until the end time that the companies have survived, expressed in months (Espenlaub et al., 2012;Neneh & Smit, 2014;Pour, 2015;Pommet, 2017). According to Hensler et al. (1997), the estimation of companies' survival is often right-censored, which means that the endpoint of the survival is unobserved (covers only until the end of the observation period). As the survival analysis model includes the observation of censored data, using a binary variable is also necessary to denote whether an observation is a censored observation or not. Thus, in measuring the IPO companies' survival, this study requires to include not only the companies' time-to-survive but also the binary variable ("1" or "0"). The steps to estimate companies' survival period are shown below.
Step 1: Estimate the survival. (t1i) is the endpoint of a company's survival and (t0i) is the company's listing date.
Step 2: After identifying the company's survival (in months), the estimation continues with the denotation of the censored observation.
where (D Survive ) is the censored data of the company using dummy survive.

Survival Analysis Model
The survival rate of the sample in the dataset, which includes the censored observation (rightcensored), can be measured non-parametrically (non-normality of data) by adopting the Kaplan-Meier (K-M) survival analysis model. Ahmad and Jelic (2014) suggest that the nonparametric survival analysis model can be employed to examine the statistical difference between the companies' survivability rate of each sub-sampling attribute over a specified period. This study intends to test the difference in companies' survival rates according to the listing years, sectors and full sample of companies. The K-M survival analysis model is a preferred test to measure companies' survival rate, as it holds no assumption on the normality of data. This study adopts the K-M log-rank test to test whether there are statistical differences in the survival rate between the sub-sampling attributes (listing years, sectors and full sample) for seven years post-IPO. Figure 1 illustrates the K-M log-rank test of this study, and the K-M model can be expressed as follows: where S(ti) is the probability of surviving in month ti, S(ti-1) is the probability of surviving in month ti -1, ni is the sample size at the month beginning ti, di is the number of sample nonsurviving at the month ti. Figure 1 illustrates the K-M log-rank test for this study.   Baluja and Singh (2016), periods of high IPO activity levels attract more companies with lower quality to enter the market for their opportunistic advantages. This phenomenon is indicated as the "hot issue phenomenon". Accordingly, IPO companies listed in a hot issue period perform well in a shorter period and have a relatively lower chance of surviving longer post-IPO (Hensler et al., 1997;Ljungqvist et al., 2006;Kooli & Meknassi, 2007;Espenlaub et al., 2016). Another interesting finding to highlight is that IPO companies listed in 2008 have the greatest difficulties in surviving as public listed companies even after the first year of listing. The majority of the IPO companies (more than 50%) in 2008 have been either delisted, unable to fulfil the listing requirements or merged after the first year of listing. It is explainable as 2008 is when the Global Financial Crisis takes place, and many companies (private and public) felt the impact of economic and financial instability (Ali & Hatta, 2013). It only takes 6 months for half of the IPO companies in 2008 to be nonsurviving companies. However, the impact of the Global Financial Crisis is only applicable to some companies listed in 2008, as the remaining 43.48% surviving companies can survive ultimately until the end of seven years of observation post-IPO.

Results and Discussions IPO Companies' Survival Rates and Longevity
The survival rates of IPO companies in the Malaysian market also vary across sectors. As indicated in Panel B of Table 2, the K-M log rank-rank test shows that there are statistical differences of IPO companies' survival rates across sectors at 1% significant level with a chisquare value of 93.90. A substantial degree of variation in the IPO companies' median survival time is also demonstrated, ranging from 33 months to 160 months. Interestingly, all IPO companies in seven out of fifteen sectors (closed end fund, financial services, healthcare, infrastructure projects, Special Purpose Acquisition (SPAC), telecommunications and media, and utilities) are surviving companies for two consecutive years post-IPO, at 100% survival rate. IPO companies in closed end funds, telecommunication and media, and utilities possess the highest survival rates in the third, fifth and seventh year at 100% post-IPO. Understanding that there is only one or two IPO companies listed in the three sectors with the highest survival rate, the 100% survival rate exhibit that all of the IPO companies listed in the three sectors can continuously trade at their ultimate performance until the end of the seven years observation post-IPO. In contrast, the only IPO company listed in the transportation and logistics sector struggles to maintain its listing status even before achieving its first year of listing.
To add, IPO companies listed in the financial services sector have among the highest survivability with a survival rate of 90% in third-year post-IPO and experience a slight decrease of survival rate by 10% (90% to 80%) in the fourth year post-IPO while sustaining and surviving ultimately until the end of the seven years' observation period. This study also reports that it takes 111 months for 50% of IPO companies in the financial services sector to be non-surviving companies, which is relatively an extended period for the majority of the IPO companies to survive post-IPO. This finding is consistent with Lamberto and Rath (2010) reporting that IPO companies classified in the financial services sector are more likely to survive longer than IPO companies in other sectors. Understanding that the financial services sector provides the capital and liquidity in the market, the financial services sector should remain as one of the strong sectors for a sustainable capital market (SCM, 2001). Another sector worth giving attention to is the plantation sector, whereby the IPO companies' survival rate is the secondhighest in the first and second year post-IPO at 91.67%. Although there is a decrement in the third year by 16.67% (91.67% to 75%) in the third year post-IPO, the remaining surviving IPO companies can ultimately survive until the end of the seven-year observation. To highlight, the plantation sector has the highest survival time median (excluding the N/A) at 160 months for 50% of the IPO companies to experience shortcomings throughout the seven years of listing. According to Shari (2019), the plantation sector was heavily supported by the Malaysian government through the Ninth Malaysia Plan 6 , allocating RM11.4 billion to develop the plantation sector. Similarly, the study also found that it is justifiable that IPO companies in the plantation sector face lesser difficulties through the Malaysian government's support, enabling the IPO companies to survive longer post-IPO.
Observable in Panel B of Table 2, the infrastructure projects sectors encounter a substantial decrease in survival rate from 100% in the first two consecutive years post-IPO to 25% until the seventh year of listing (three out of four companies become non-survivors). This makes the sector with the lowest survival rate for five consecutive years. The survival time median indicated that 50% of the IPO companies in the infrastructure project sector experience the shortest time in becoming non-surviving companies compared to other sectors, at 33 months. Furthermore, it can be analyzed that two out of four IPO companies listed in the SPAC sector experienced a shortfall in the third year post-IPO, leaving the other two IPO companies to survive ultimately until the end of seven years post-IPO. The 36 month of survival time median is going according to the listing requirement stated by the SCM in the 4th Revision Equity Guidelines Chapter 6. IPO companies listed as SPAC will only be given 36 months to execute their plan acquiring assets (SCM, 2021). Given that the IPO companies failed to adhere to the listing requirement, such IPO companies will no longer trade in the capital market, explaining that the two IPO companies cannot survive longer than 36 months post-IPO. Next, the technology sector portrays the lowest survival rate at 68.32% in the second year of listing and the second-lowest from the third to the seventh year, ranging from 44.51% to 51.49%. IPO companies listed in the technology sector have always been indicated as higher risk IPO companies because of the rapid and technological changes the sector encounters (Wyatt, 2014). The risk of IPO companies listed in the technology sector revolves around market acceptance. If investors turn against certain products, the IPO companies might face issues sustaining profit and growth (Demer & Joos, 2007;Bhattacharya et al., 2009). As a result of the inadequate resources, 50% of the IPO companies could only survive as long as 50 months post-IPO.
In an overall outlook, Panel C reports the full sample survival rate of IPO companies listed from 2000 to 2014 regardless of sectors. The survival rate reports that out of 527 IPO companies, 16.13% of IPO companies have difficulties surviving in the first year of listing. Only 83.87% of IPO companies remain as surviving companies in the first year post-IPO. In the third-year post-IPO, the survival rate of IPO companies plunges by another 12.33% (83.87% to 71.54%). This study reports lower survival rates than found in past studies, both developed and developing markets (Schultz, 1993;Kooli & Meknassi, 2007;Chou et al., 2013;Ahmad & Jelic, 2014;Shari, 2019;Ahmad et al., 2021). Consistently, the survival rate falls lower in the fifth year post-IPO, at 62.81% and seventh year post-IPO, at 56.91%. This finding is substantially lower than the average survival rate of IPO companies in the Asia-Pacific reported in a study by Espenlaub et al. (2016), at 96.84% three years after listing and 93.17% five years after listing. This study also emphasizes that the IPO companies' survival rate is significantly lower than the survival rate of IPO companies reported in the two studies conducted (Shari, 2019 andAhmad et al., 2021) in the Malaysian market throughout the seven years observation. The finding reports a median of 114 months for the remaining 50% of IPO companies to survive post-IPO. To justify, the definition of surviving companies in both studies conducted in the Malaysian market is not similar to that of surviving companies applies in this study, i.e., actively traded IPO companies at their ultimate performance. Thus, the variation in the survival rate of IPO companies reported in all studies should vary according to the definition of surviving companies each study uniquely adopts.  ACE Market, which is in 2002, 2003, 2004, 2009, 2011, suggesting that most IPO companies listed in the Malaysian market are large-sized companies. Although most IPO companies are listed in the Main Market, IPO companies listed in the ACE Market demonstrate a higher survival rate for eight listing years (2002, 2003, 2004, 2008, 2009, 2010, 2012, 2013 and 2014)        To sum up, the results in this study should be of interest to the policymakers, issuing companies and investors as guidance to assess companies' survivability based on their listing years, sectors and markets. Since the survivability of IPO companies is of great concern to Bursa Malaysia, the findings in this study help to verify the effectiveness and frameworks of Practice Notes and Guidance Notes to elongate the survival of companies listed in the Malaysian market. Moreover, the decision to go public is the decision that requires thorough consideration by issuing companies to maximize the value of their stake, which the survivability of the companies post-IPO is of great concern. As companies evolve with a systematic change, being aware of the survivability of the companies through the evaluation of listing years and sectors may provide additional insights on the probability of surviving longer post-IPO for the issuing companies.

IPO Companies' Survival Rates by Listing Markets
Similarly, investors concerning about companies' survivability post-IPO may be selective to IPO companies coming listed in 2009 or avoid companies listed in the technology sector. This type of company may be unideal for their investment portfolio construction. Future researchers are suggested to further examine the contributable factors for IPO companies to survive longer post-IPO using other survival analysis methods (semi-parametric or parametric).