Strategic Waiting in the IPO Markets

29 Pages Posted: 12 Mar 2009 Last revised: 25 Sep 2011

Gonul Colak

Hanken School of Economics

Hikmet Gunay

University of Manitoba

Date Written: July 30, 2011

Abstract

The paper analyzes the strategic waiting tendencies of IPO firms. Our model shows why some high-quality firms may strategically delay their initial public offering until a favorable signal about the economic conditions is generated by other issuing firms. Survival analysis suggests that IPOs in the highest quality decile have significantly higher median waiting days (since the start of a rising IPO cycle) than the IPOs in the lowest decile. During the early stages of an expanding IPO cycle the average firm quality is lower than in its later stages. We find supporting evidence also from the IPOs of future S&P500 firms.

Keywords: IPO Clustering, IPO Cycles, Social Learning, Strategic Waiting, Survival Analysis

JEL Classification: C41, C72, D82, D83, G20, E32

Suggested Citation

Colak, Gonul and Gunay, Hikmet, Strategic Waiting in the IPO Markets (July 30, 2011). Journal of Corporate Finance, Vol. 17, pp. 555-583, 2011. Available at SSRN: https://ssrn.com/abstract=1358380

Gonul Colak (Contact Author)

Hanken School of Economics ( email )

P.O. Box 479
FI-00101 Helsinki, 00101
Finland

Hikmet Gunay

University of Manitoba ( email )

Economics
Winnipeg R3T 5V5, Manitoba
Canada

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