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Stock market development and the financing role of IPOs in acquisitions

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  • Aktas, Nihat
  • Andries, Kathleen
  • Croci, Ettore
  • Ozdakak, Ali

Abstract

We examine the role of IPOs as a source of financing by comparing firms from countries with different degrees of stock market development. Focusing on acquisition investments, our results suggest that firms operating in economies with a more developed stock market extract more benefits from the financing role of IPOs than firms from countries with a less developed stock market. Controlling for the importance of bank financing does not alter our main findings. IPO firms from market-focused countries also experience a relatively larger increase in size and in profitability in the post-IPO period. Our results indicate that the purpose of IPO financing varies with the financial system in general and with the degree of stock market development in particular.

Suggested Citation

  • Aktas, Nihat & Andries, Kathleen & Croci, Ettore & Ozdakak, Ali, 2019. "Stock market development and the financing role of IPOs in acquisitions," Journal of Banking & Finance, Elsevier, vol. 98(C), pages 25-38.
    • Handle: RePEc:eee:jbfina:v:98:y:2019:i:c:p:25-38
    DOI: 10.1016/j.jbankfin.2018.10.015
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    5. Eyad M. Malkawi, 2019. "Reviewing the Equilibrium and Causal Relationships between Stock Market Development and Economic Growth in Jordan," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(12), pages 1-37, December.
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    8. Ben Moews, 2023. "On random number generators and practical market efficiency," Papers 2305.17419, arXiv.org, revised Jul 2023.
    9. Yusuf Babatunde Adeneye & Ei Yet Chu, 2020. "Managerial Aversion and Capital Structure: Evidence from Southeast Asia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 15(1), pages 155-183.

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    More about this item

    Keywords

    Stock market development; Bank-based financial system; Merger and acquisition; Ipo; Financial constraint;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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