IDEAS home Printed from https://ideas.repec.org/a/fip/fedhep/y2004iqivp2-11nv.28no.4.html
   My bibliography  Save this article

Interest rates and the timing of new production

Author

Listed:
  • Boyan Jovanovic
  • Peter L. Rousseau

Abstract

This article studies the relation between IPO investment and the rate of interest. The 1950s and early 1960s, especially, were periods of very low real interest rates, and IPO investment was very low, with firms delaying their IPOs significantly. The authors find a qualitative difference between investment of IPO-ing firms and the investment of incumbent firms. The latter is decreasing in the interest rate, as neoclassical theory predicts. On the other hand, very low interest rates tend to discourage IPOs, and this may be why the 1950s and 1960s contained few IPOs.

Suggested Citation

  • Boyan Jovanovic & Peter L. Rousseau, 2004. "Interest rates and the timing of new production," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 2-11.
  • Handle: RePEc:fip:fedhep:y:2004:i:qiv:p:2-11:n:v.28no.4
    as

    Download full text from publisher

    File URL: http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2004/ep_4qtr2004_part1_Jovanovic_Rousseau.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Laura L. Veldkamp, 2006. "Media Frenzies in Markets for Financial Information," American Economic Review, American Economic Association, vol. 96(3), pages 577-601, June.
    2. Lee, Inmoo & et al, 1996. "The Costs of Raising Capital," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 19(1), pages 59-74, Spring.
    3. Boyan Jovanovic & Peter L. Rousseau, 2001. "Why Wait? A Century of Life before IPO," American Economic Review, American Economic Association, vol. 91(2), pages 336-341, May.
    4. Tobias J. Moskowitz & Annette Vissing-Jørgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," American Economic Review, American Economic Association, vol. 92(4), pages 745-778, September.
    5. Jain, Bharat A & Kini, Omesh, 1994. " The Post-Issue Operating Performance of IPO Firms," Journal of Finance, American Finance Association, vol. 49(5), pages 1699-1726, December.
    6. Shleifer, Andrei & Vishny, Robert W., 2003. "Stock market driven acquisitions," Journal of Financial Economics, Elsevier, vol. 70(3), pages 295-311, December.
    7. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-894, October.
    8. Tobias J. Moskowitz & Annette Vissing-Jorgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," NBER Working Papers 8876, National Bureau of Economic Research, Inc.
    9. Simon Kuznets & Elizabeth Jenks, 1961. "Capital in the American Economy: Its Formation and Financing," NBER Books, National Bureau of Economic Research, Inc, number kuzn61-1, January.
    10. repec:hrv:faseco:30748164 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Johann Burgstaller, 2009. "When and why do Austrian companies issue shares?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, pages 229-244.

    More about this item

    Keywords

    Interest rates ; Investments;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedhep:y:2004:i:qiv:p:2-11:n:v.28no.4. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bernie Flores). General contact details of provider: http://edirc.repec.org/data/frbchus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.