Empirical Study of Market Conditions and IPOs Public Offerings: US Economy in Perspective
Journal of Financial Management And Analysis Vol. 26 (1), 2013
Posted: 3 Sep 2013
Date Written: August 27, 2013
Abstract
This study examines the relation between the financial market conditions (i.e. interest rates) and the initial public offering (i.e., IPO) activity. Using robust regressions and finds that the change in the level of interest rates over the previous four quarters explains the size of the offering. Firms tend to do a bigger IPO when interest rates are low compared to the rates four quarters ago. Further that the IPO market becomes more active (i.e., more firms coming to the market) when interest rates are low compared to the rates four or eight quarters ago. Finally, the long-run (i.e. up to five years) impact of IPO market timing on issuing firms’ capital structure is examined and it is found that market timing does not have a persistent impact on issuing firms’ capital structure.
Keywords: Market conditions, Interest rates, Initial Public Offerings, Market timing, Capital structure
JEL Classification: E44, G30, G32, O51
Suggested Citation: Suggested Citation