Why Do Companies Go Public? An Empirical Analysis

Marco Pagano, Fabio Panetta and Luigi Zingales

No 1332, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper empirically analyses the determinants of an initial public offering (IPO) and the consequences of this decision on a company's investment and financial policy. We compare both the ex-ante and the ex-post characteristics of IPOs with those of a large sample of privately held companies of similar size. We find that: (i) the likelihood of an IPO is positively related to the market-to-book ratio prevailing in the relevant industrial sector and to a company's size; (ii) IPOs are followed by an abnormal reduction in profitability; (iii) the new equity capital raised upon listing is not used to finance subsequent investment and growth, but to reduce leverage; (iv) going public reduces the cost of bank credit; and (v) it is often associated with equity sales by controlling shareholders, and is followed by a higher turnover of control than for other companies.

Keywords: Going Public; Initial Public Offering; Stock Market (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 (search for similar items in EconPapers)
Date: 1996-02
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Citations: View citations in EconPapers (51)

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Related works:
Working Paper: Why Do Companies Go Public? An Empirical Analysis (1995)
Working Paper: Why Do Companies Go Public? An Empirical Analysis
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