Abstract

http://ssrn.com/abstract=1443057
 
 

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Entrepreneurial Learning, the IPO Decision, and the Post-Ipo Drop in Firm Profitability


Ľuboš Pástor


affiliation not provided to SSRN

Lucian A. Taylor


University of Pennsylvania - The Wharton School

Pietro Veronesi


University of Chicago - Booth School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

August 2009

The Review of Financial Studies, Vol. 22, Issue 8, pp. 3005-3046, 2009

Abstract:     
We develop a model of the optimal initial public offering (IPO) decision in the presence of learning about the average profitability of a private firm. The entrepreneur trades off diversification benefits of going public against benefits of private control. Going public is optimal when the firm's expected future profitability is sufficiently high. The model predicts that firm profitability should decline after the IPO, on average, and that this decline should be larger for firms with more volatile profitability and firms with less uncertain average profitability. These predictions are supported empirically in a sample of 7183 IPOs in the United States between 1975 and 2004.

Keywords: D83, G32, L26

Accepted Paper Series





Not Available For Download

Date posted: August 5, 2009  

Suggested Citation

Pástor, Ľuboš and Taylor, Lucian A. and Veronesi, Pietro, Entrepreneurial Learning, the IPO Decision, and the Post-Ipo Drop in Firm Profitability (August 2009). The Review of Financial Studies, Vol. 22, Issue 8, pp. 3005-3046, 2009. Available at SSRN: http://ssrn.com/abstract=1443057 or http://dx.doi.org/hhn082

Contact Information

Ľuboš Pástor (Contact Author)
affiliation not provided to SSRN
No Address Available
Lucian A. Taylor
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
HOME PAGE: http://finance.wharton.upenn.edu/~luket/
Pietro Veronesi
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-6348 (Phone)
773-702-0458 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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