To Be or Not to Be (Public)

Abstract

Why do firms go public? Despite the existence of many theories addressing this question, lack of data on private firms before they are public hampers our ability to test these theories. We circumvent this challenge by testing reverse predictions of going public theories using firms' decisions to go private. We employ a comprehensive sample of going private transactions from 1980-2004 in the U.S. and examine how these firms differ at the initial public offering and over their public life relative to a sample of firms that went and remained public. We find that many of the factors that drive the firms to go private are evident at the initial public offering. Our results provide strong support for the importance of information and liquidity considerations in being a public firm.

Keywords: Going Public, Going Private

JEL Classification: G10, G30, G32, G34, G31