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Why Do Companies Go Public? An Empirical Analysis

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  • Marco Pagano

    (Università di Salerno and CEPR,)

  • Fabio Panetta

    (Banca d'Italia,)

  • and Luigi Zingales

    (University of Chicago, NBER, and CEPR)

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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Bibliographic 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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References

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  1. Franks, Julian & Mayer, Colin, 2001. "Ownership and Control of German Corporations," Review of Financial Studies, Society for Financial Studies, vol. 14(4), pages 943-77.
  2. J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, . "Noise Trader Risk in Financial Markets," J. Bradford De Long's Working Papers _124, University of California at Berkeley, Economics Department.
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  14. Campbell, Tim S., 1979. "Optimal Investment Financing Decisions and the Value of Confidentiality," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 14(05), pages 913-924, December.
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  17. Loughran, Tim & Ritter, Jay R. & Rydqvist, Kristian, 1995. "Initial public offerings: International insights," Pacific-Basin Finance Journal, Elsevier, vol. 3(1), pages 139-140, May.
  18. 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.
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