Why Do Firms Go Public? Evidence from the Banking Industry
Richard J. Rosen
Federal Reserve Bank of Chicago - Economic Research
Indiana University - Kelley School of Business - Department of Finance
Chad J. Zutter
University of Pittsburgh - Finance Group
November 30, 2005
In this paper we propose that a sample of private banks and bank holding companies can shed light on theories of the going public decision. Testing these theories is a challenge because most private firms do not disclose much information. By law, all banks, both public and private, must disclose their financial results, and that requirement enables us to compare banks that go pubic to those that remain private, an essential comparison in any test of a theoretical model of the IPO decision.
Our results indicate that banks that convert to public ownership are more likely to become targets than control banks that remain private. Banks that go public are also more likely to become acquirers than control banks. IPO banks grow faster than control banks after going public, although there is some evidence that their performance deteriorates.
Number of Pages in PDF File: 37
Keywords: Going public, initial public offering, takeover, banking
JEL Classification: G21, G32, G34
Date posted: March 23, 2005