What Makes Group-Affiliated Firms Go Public?
KAIST Graduate School of Management Working Paper Series No. 2005-002
40 Pages Posted: 14 Apr 2005
Date Written: September 2005
The paper attempts to shed light on how group-affiliated firms make their decision on initial public offerings. In particular, we highlight the importance of group-level factors. From our ex ante analysis, using a sample of chaebol affiliated firms in Korea, we find that firms are more likely to go public (i) if a group-controlling shareholder holds high direct share ownership in the company; (ii) if the firm's contribution to group control is low; or (iii) if firms are less likely to benefit from the internal capital market. From our ex post analysis, we find that IPO firms do make heavy capital investments in the IPO year and in the year after.
Keywords: Initial public offering (IPO), group control, internal capital market, business conglomerate, chaebols
JEL Classification: G32, G34
Suggested Citation: Suggested Citation