Public Market Staging: The Timing of Capital Infusions in Newly Public Firms

Posted: 23 May 2013 Last revised: 5 Apr 2018

See all articles by Michael G. Hertzel

Michael G. Hertzel

Arizona State University (ASU) - Finance Department

Mark R. Huson

University of Alberta - Department of Finance and Statistical Analysis

Robert Parrino

University of Texas at Austin - Department of Finance

Date Written: April 29, 2010

Abstract

We examine financing activities of newly public firms for evidence on capital staging in the public equity market. Staging (sequential financing) can increase issuance costs but can limit costs associated with overinvestment. We find evidence consistent with the hypothesis that staging is employed to help control the overinvestment problem in public firms. Initial public offering (IPO) proceeds, relative to external financing requirements, are smaller for firms with more intangible assets and more research and development (R&D)-intensive firms. Asset intangibility and R&D intensity are also both negatively related to the length of time from a firm's IPO to its first post-IPO capital infusion.

Keywords: Initial public offering, Managerial incentives, Staging of capital, Cash holdings

JEL Classification: G24, G32, G34, G35

Suggested Citation

Hertzel, Michael G. and Huson, Mark R. and Parrino, Robert, Public Market Staging: The Timing of Capital Infusions in Newly Public Firms (April 29, 2010). Journal of Financial Economics (JFE), Vol. 106, No. 1, 2012; University of Alberta School of Business Research Paper No. 206. Available at SSRN: https://ssrn.com/abstract=2268721

Michael G. Hertzel

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
P.O. Box 873906
Tempe, AZ 85287-3906
United States
480-965-6869 (Phone)
602-965-8539 (Fax)

Mark R. Huson (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

4-20C Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2803 (Phone)
780-492-3325 (Fax)

Robert Parrino

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-5788 (Phone)
512-471-5073 (Fax)

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