The Choice of IPO versus Takeover: Empirical Evidence

James C. Brau, Bill Francis and Ninon Kohers
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James C. Brau: Brigham Young University
Bill Francis: University of South Florida
Ninon Kohers: University of South Florida

The Journal of Business, 2003, vol. 76, issue 4, 583-612

Abstract: We examine factors that influence the choice between an initial public offering (IPO) and a takeover by a public acquirer. Our results show that the industry concentration, high-tech industry affiliation, current cost of debt, relative "hotness" of the IPO market, firm size, and insider ownership percentage are all positively related to the probability of an IPO. In contrast, private companies in high market-to-book industries, financial service sectors, highly leveraged industries, and deals involving greater liquidity for selling insiders show a stronger likelihood for takeovers. Our findings also indicate that a liquidity discount exists in takeovers relative to IPOs.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:76:y:2003:i:4:p:583-612

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