Why Do Firms Go Public? Evidence from the Banking Industry

37 Pages Posted: 23 Mar 2005  

Richard J. Rosen

Federal Reserve Bank of Chicago - Economic Research

Scott Smart

Indiana University - Kelley School of Business - Department of Finance

Chad J. Zutter

University of Pittsburgh - Finance Group

Date Written: November 30, 2005

Abstract

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.

Keywords: Going public, initial public offering, takeover, banking

JEL Classification: G21, G32, G34

Suggested Citation

Rosen, Richard J. and Smart, Scott and Zutter, Chad J., Why Do Firms Go Public? Evidence from the Banking Industry (November 30, 2005). Available at SSRN: https://ssrn.com/abstract=686473 or http://dx.doi.org/10.2139/ssrn.686473

Richard J. Rosen

Federal Reserve Bank of Chicago - Economic Research ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
312-322-6368 (Phone)
312-294-6262 (Fax)

Scott B. Smart (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Kelley School of Business
Bloomington, IN 47405
United States
812-855-3401 (Phone)
812-855-5875 (Fax)

Chad J. Zutter

University of Pittsburgh - Finance Group ( email )

352 Mervis Hall, Katz GSOB
University of Pittsburgh
Pittsburgh, PA 15260
United States
412-648-2159 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~czutter/

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