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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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    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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