Why Do Companies Go Public? An Empirical Analysis
University of Naples Federico II - Department of Economics and Statistics; Centre for Studies in Economics and Finance (CSEF); Einaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)
Bank of Italy
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
Journal of Finance, Vol. 53, No.1, February 1998
Using a large database of private firms in Italy, we analyze the determinants of initial public offerings (IPOs) by comparing the ex ante and ex post characteristics of IPOs with those of private firms. The likelihood of an IPO is increasing in the company's size and the industry's market-to-book ratio. Companies appear to go public not to finance future investments and growth, but to rebalance their accounts after high investment and growth. IPOs are also followed by lower cost of credit and increased turnover in control.
Date posted: February 23, 2003