Capital-Structure Changes Around IPOs

60 Pages Posted: 3 Oct 2013 Last revised: 24 Jul 2014

See all articles by Evan Dudley

Evan Dudley

Queen's University - Smith School of Business

Christopher M. James

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

Date Written: November 11, 2013

Abstract

This paper examines capital-structure changes around IPOs. We find that the magnitude of leverage changes as well as market timing in hot-issue markets are sensitive to sample selection and whether preferred shares are treated as debt when computing pre-IPO leverage. Consistent with investor concern with overinvestment, firms that rely on preferred stock prior to their IPO are more likely to engage in staged equity financing after they go public. Overall, using a broader sample of IPO firms, we find little evidence of transitory declines in leverage during hot-issue markets.

Keywords: Capital structure, preferred shares, market timing, staged finance, initial public offerings

JEL Classification: G32

Suggested Citation

Dudley, Evan and James, Christopher M., Capital-Structure Changes Around IPOs (November 11, 2013). Available at SSRN: https://ssrn.com/abstract=2334795 or http://dx.doi.org/10.2139/ssrn.2334795

Evan Dudley (Contact Author)

Queen's University - Smith School of Business ( email )

Goodes Hall
Kingston, Ontario K7L 3N6
Canada

Christopher M. James

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

P.O. Box 117168
Gainesville, FL 32611-7168
United States
352-392-3486 (Phone)
352-392-0301 (Fax)

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