On the Decision to Go Public: Evidence from Privately-Held Firms

47 Pages Posted: 23 Apr 2001

See all articles by Alexander Ljungqvist

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR); Swedish House of Finance; European Corporate Governance Institute (ECGI)

Ekkehart Boehmer

Singapore Management University - Lee Kong Chian School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: February 12, 2004

Abstract

We test recent theories of when companies go public which predict that 1) more companies will go public when outside valuations are high or have increased, 2) companies prefer going public when uncertainty about their future profitability is high, and 3) firms whose controlling shareholders enjoy large private benefits of control are less likely to go public. Our analysis tracks a set of 330 privately held German firms which between 1984 and 1995 announced their intention to go public to see whether, when, and how they subsequently sold equity to outside investors. Controlling for private benefits, we find that the likelihood of firms completing an initial public offering increases in the firm's investment opportunities and valuations. We also show that these effects are distinct from factors that increase firms' demand for outside capital more generally.

Keywords: Going public decision; IPO timing; Private benefits; Family firms.

JEL Classification: G32

Suggested Citation

Ljungqvist, Alexander and Ljungqvist, Alexander and Boehmer, Ekkehart, On the Decision to Go Public: Evidence from Privately-Held Firms (February 12, 2004). Available at SSRN: https://ssrn.com/abstract=266993 or http://dx.doi.org/10.2139/ssrn.266993

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Ekkehart Boehmer (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

Singapore

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