Why Do Firms Go Public Through Debt Instead of Equity?

Critical Finance Review

Critical Finance Review, volume 7, issue 1, 2018 [10.1561/104.00000057]

30 Pages Posted: 21 Jun 2018

See all articles by Denys Glushkov

Denys Glushkov

University of Pennsylvania - The Wharton School, Wharton Research Data Services (WRDS); Acadian Asset Management LLC

Ajay Khorana

Georgia Institute of Technology - Finance Area

P. Raghavendra Rau

University of Cambridge; European Corporate Governance Institute (ECGI)

Jingxuan Zhang

University of Cambridge - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2018

Abstract

We analyze a sample of private firms that go public through an initial public debt offering (IPDO) as an alternative to going public through equity (IPO). Firms that choose the IPDO route are larger, more likely to be backed by a financial sponsor such as a venture capital or private equity firm, and less likely to face information asymmetry than traditional IPO firms. Only a quarter of these firms eventually conduct an IPO, but those who do face lower underpricing than their contemporaneous private peers who do not have public debt at the time of going public.

Keywords: initial public debt offerings, information asymmetry, going public decision, financial statement informativeness

JEL Classification: G32

Suggested Citation

Glushkov, Denys and Khorana, Ajay and Rau, P. Raghavendra and Zhang, Jingxuan, Why Do Firms Go Public Through Debt Instead of Equity? (June 1, 2018). Critical Finance Review, Critical Finance Review, volume 7, issue 1, 2018 [10.1561/104.00000057], Available at SSRN: https://ssrn.com/abstract=3192280 or http://dx.doi.org/10.1561/104.00000057

Denys Glushkov

University of Pennsylvania - The Wharton School, Wharton Research Data Services (WRDS) ( email )

WRDS, St. Leonard's Court
3819 Chestnut St, suite 300
Philadelphia, PA 19104
United States
2158986705 (Phone)

HOME PAGE: http://ssrn.com/author=664253

Acadian Asset Management LLC ( email )

260 Franklin Street
Boston, MA 02110
United States

Ajay Khorana

Georgia Institute of Technology - Finance Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-5110 (Phone)
404-894-6030 (Fax)

P. Raghavendra Rau (Contact Author)

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

European Corporate Governance Institute (ECGI)

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

Jingxuan Zhang

University of Cambridge - Finance ( email )

United States

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