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Public market staging: The timing of capital infusions in newly public firms

Michael G. Hertzel, Mark R. Huson and Robert Parrino

Journal of Financial Economics, 2012, vol. 106, issue 1, 72-90

Abstract: We examine financing activities of newly public firms for evidence on capital staging in the public equity market. Staging (sequential financing) can increase issuance costs but can limit costs associated with overinvestment. We find evidence consistent with the hypothesis that staging is employed to help control the overinvestment problem in public firms. Initial public offering (IPO) proceeds, relative to external financing requirements, are smaller for firms with more intangible assets and more research and development (R&D)-intensive firms. Asset intangibility and R&D intensity are also both negatively related to the length of time from a firm's IPO to its first post-IPO capital infusion.

Keywords: Initial public offering; Managerial incentives; Staging of capital; Cash holdings (search for similar items in EconPapers)
JEL-codes: G24 G32 G34 G35 (search for similar items in EconPapers)
Date: 2012
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