47 Pages Posted: 23 Apr 2001
Date Written: February 12, 2004
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: Suggested Citation
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