Effects of Initial Public Offering on the Value of a Company: A Case Study of Tanzania Breweries Limited Company, Dar es Salaam

Abstract

This study aims to analyze effects of initial public offering on the value of a company in Tanzania using Tanzania Breweries Public Limited Company as a case study. The specific objectives of the study were to assess the influence of stock price, asset valuation and intangible assets on the value of Tanzania Breweries PLC. The study adopted explanatory research design that included time series analysis (TSA) because analysis of the past is vital for forecasting the future and employed market timing theory. The method of data collection was documentary analysis; E-views was used to analyze the data which were collected from TBL, DSE and UNCTAD from 2010 to 2020. After confirming the existence of long-term associations between variables in our model, the collected data was submitted to ordinary least square (OLS) and t-values using the vector error correlation model. Results of the study indicated that asset valuation (ASSV) had a positive but small impact on the value of the company. While the short and long-term coefficients test between intangible assets (INTA) and stock price (STKP) had a negative and minor impact on Tanzania Breweries Company’s value at 5% of critical value. It is therefore suggested that organizations should focus on developing goodwill as one of the intangible assets that attract investors and shareholders. Management as well as owners of companies should be trained on the importance of using IPO as a source of improving the equity capital rather than using debt instruments. The government should strengthen policies and loosen some regulations, particularly for foreign investors, in order to attract more direct and indirect investment.