Product Market Characteristics and the Choice between IPOs and Acquisitions

73 Pages Posted: 13 Jan 2010 Last revised: 10 May 2018

See all articles by Thomas J. Chemmanur

Thomas J. Chemmanur

Boston College - Carroll School of Management

Jie He

University of Georgia - Department of Finance

Shan He

Oregon State University; Louisiana State University

Debarshi K. Nandy

Brandeis University - International Business School

Date Written: August 30, 2016

Abstract

Using unique U.S. Census data sets, we analyze how entrepreneurial firms’ product market characteristics affect their choice between going public, being acquired, or remaining private. Size, total factor productivity (TFP), sales growth, capital expenditure, market share, access to private funding, and human capital intensiveness significantly increase a private firm’s likelihood of an IPO relative to an acquisition. Firms in industries with less information asymmetry and higher stock liquidity are more likely to choose an IPO instead of an acquisition. While TFP peaks around either form of exit, the rate of increase in TFP prior to acquisitions and the subsequent decrease is smaller than that around IPOs.

Keywords: Initial Public Offerings, Merger and Acquisitions, Product market, exit decisions, venture capital

JEL Classification: G32, G24, G14

Suggested Citation

Chemmanur, Thomas J. and He, Jie and He, Shan and Nandy, Debarshi K., Product Market Characteristics and the Choice between IPOs and Acquisitions (August 30, 2016). Journal of Financial and Quantitative Analysis (JFQA), April 2018, 53(2), 681-721. Available at SSRN: https://ssrn.com/abstract=1536024 or http://dx.doi.org/10.2139/ssrn.1536024

Thomas J. Chemmanur

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Jie He

University of Georgia - Department of Finance ( email )

B318 Amos Hall
Terry College of Business, University of Georgia
Athens, GA 30602-6253
United States

Shan He (Contact Author)

Oregon State University ( email )

Corvallis, OR 97331
United States

Louisiana State University ( email )

Baton Rouge, LA 70803
United States

Debarshi K. Nandy

Brandeis University - International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States

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