Where Have All the IPOs Gone?

56 Pages Posted: 5 Nov 2011 Last revised: 26 Sep 2013

See all articles by Jay R. Ritter

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate

Xiaohui Gao Bakshi

Fox School of Business, Temple University

Zhongyan Zhu

Monash University

Date Written: August 26, 2013


During 1980-2000, an average of 310 companies per year went public in the U.S. Since the technology bubble burst in 2000, the average has been only 99 initial public offerings (IPOs) per year, with the drop especially precipitous among small firms. Many have blamed the Sarbanes-Oxley Act of 2002 and the 2003 Global Settlement’s effects on analyst coverage for the decline in U.S. IPO activity. Our alternative explanation posits that the advantages of selling out to a larger organization, which can speed a product to market and realize economies of scope, have increased relative to the benefits of remaining as an independent firm. Consistent with this hypothesis, we document that small company IPOs have had declining profitability and an increasing probability of being involved in acquisitions.

Keywords: IPO volume, trade sales, economies of scope, effects of Sarbanes-Oxley, VC exits

JEL Classification: G24, G38

Suggested Citation

Ritter, Jay R. and Gao, Xiaohui and Zhu, Zhongyan, Where Have All the IPOs Gone? (August 26, 2013). Available at SSRN: https://ssrn.com/abstract=1954788 or http://dx.doi.org/10.2139/ssrn.1954788

Jay R. Ritter (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
(352) 846-2837 (Phone)
(352) 392-0301 (Fax)

HOME PAGE: http://https://site.warrington.ufl.edu/ritter

Xiaohui Gao

Fox School of Business, Temple University ( email )

Philadelphia, PA 19122
United States

Zhongyan Zhu

Monash University ( email )

Department of Banking and Finance
Caufield East, Victoria 3145
61-3-9903-4546 (Phone)

HOME PAGE: http://johnchungyenchu.org/

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