The Stock Market as a Source of Capital: Some Lessons from Initial Public Offerings in Italy
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); University of Chicago - Polsky Center for Entrepreneurship; European Corporate Governance Institute (ECGI)
European Economic Review, Vol. 40, Issues 3-5, pp. 1057-1069, April 1996
This paper complements the analysis of the decision to go public contained in Pagano et al. (1995). We compare a larger set of Italian initial public offerings, including holding companies, with size-matched private companies. Even in this larger sample we find evidence that: (i) the new equity capital raised upon listing is not used to finance subsequent investment and growth; (ii) going public reduces the cost of credit; (iii) it is often associated with equity sales by controlling shareholders, and is followed by a higher turnover of control than for other companies. A novel finding is that the funds raised are used to purchase stakes in other companies and other financial assets.
Keywords: Initial public offering, Going public, Stock market
Date posted: February 23, 2003