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Why Do Companies Go Public? An Empirical Analysis

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  • MARCO PAGANO
  • FABIO PANETTA
  • LUIGI ZINGALES

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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Paper provided by Center for Research in Security Prices, Graduate School of Business, University of Chicago in its series CRSP working papers with number 330.

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Handle: RePEc:wop:chispw:330

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