Do Favorable Market Conditions Lead to Costly Decisions to Go Public?
City University of Hong Kong
Wayne H. Mikkelson
University of Oregon - Department of Finance
August 24, 2009
AFA 2009 San Francisco Meetings Paper
We investigate the real effects of decisions to undertake an initial public offering of stock in favorable market conditions. Specifically, we examine potential effects on investment expenditures, operating performance and likelihood of survival. We find that the average firm going public during favorable market conditions, characterized by a high investor sentiment index, subsequently increases acquisitions and R&D expenditures. We do not find, however, that these changes in investment lead to worse operating performance or a higher incidence of firm failure. Our findings do not support the hypothesis that decisions to go public in favorable market conditions lead to undesirable real effects.
Number of Pages in PDF File: 41
Keywords: initial public offerings, market conditions, operating performance, delisting rates
JEL Classification: C14, G30
Date posted: March 25, 2008 ; Last revised: February 18, 2013
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