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Why Do Companies Go Public? An Empirical Analysis

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Author Info
Marco Pagano (Università di Salerno and CEPR,)
Fabio Panetta (Banca d'Italia,)
and Luigi Zingales (University of Chicago, NBER, and CEPR)

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Abstract

Using a large database of private firms in Italy, we analyze the determinants of initial public offerings (IPOs) by comparing the ex ante and ex post characteristics of IPOs with those of private firms. The likelihood of an IPO is increasing in the company's size and the industry's market-to-book ratio. Companies appear to go public not to finance future investments and growth, but to rebalance their accounts after high investment and growth. IPOs are also followed by lower cost of credit and increased turnover in control. Copyright The American Finance Association 1998.

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Publisher Info
Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 53 (1998)
Issue (Month): 1 (02)
Pages: 27-64
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Handle: RePEc:bla:jfinan:v:53:y:1998:i:1:p:27-64

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-60, December. [Downloadable!] (restricted)
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  2. Lerner, Joshua, 1994. "Venture capitalists and the decision to go public," Journal of Financial Economics, Elsevier, vol. 35(3), pages 293-316, June. [Downloadable!] (restricted)
  3. Zingales, Luigi, 1995. "What Determines the Value of Corporate Votes?," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1047-73, November. [Downloadable!] (restricted)
  4. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-38, August. [Downloadable!] (restricted)
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  5. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212. [Downloadable!] (restricted)
  6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October. [Downloadable!] (restricted)
  7. Loughran, Tim & Ritter, Jay R, 1995. " The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March. [Downloadable!] (restricted)
  8. Yosha Oved, 1995. "Information Disclosure Costs and the Choice of Financing Source," Journal of Financial Intermediation, Elsevier, vol. 4(1), pages 3-20, January. [Downloadable!] (restricted)
  9. Franks, Julian R & Mayer, Colin, 2001. "Ownership and Control of German Corporations," CEPR Discussion Papers 2898, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 32(2), pages 371-87, May. [Downloadable!] (restricted)
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  11. Holmstrom, Bengt & Tirole, Jean, 1993. "Market Liquidity and Performance Monitoring," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 678-709, August. [Downloadable!] (restricted)
  12. Loughran, Tim & Ritter, Jay R. & Rydqvist, Kristian, 1994. "Initial public offerings: International insights," Pacific-Basin Finance Journal, Elsevier, vol. 2(2-3), pages 165-199, May. [Downloadable!] (restricted)
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  13. Pagano, Marco, 1993. "The flotation of companies on the stock market : A coordination failure model," European Economic Review, Elsevier, vol. 37(5), pages 1101-1125, June. [Downloadable!] (restricted)
  14. Roni Michaely & Wayne H. Shaw, 1995. "The Choice of Going Public: Spin-offs vs. Carve-outs," Financial Management, Financial Management Association, vol. 24(3), Fall.
  15. Degeorge, Francois & Zeckhauser, Richard, 1993. " The Reverse LBO Decision and Firm Performance: Theory and Evidence," Journal of Finance, American Finance Association, vol. 48(4), pages 1323-48, September. [Downloadable!] (restricted)
  16. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-88, June. [Downloadable!] (restricted)
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