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Modeling the Time to an Initial Public Offering: When does the Fruit Ripen?

Yamin Ahmad and Russ Kashian

Working Papers from UW-Whitewater, Department of Economics

Abstract: This paper investigates the characteristics possessed by credit unions who have converted to mutual savings institutions, which might lead them to demutualize and become publicly traded banks. We adopt a duration model framework to examine these characteristics. Our key findings are as follows. First, we find evidence of positive duration dependence in the data we examine. Second, we find that the hazard of an IPO issue increases in two waves. The first occurs between three and a half to four years reflecting the increased transition intensity for those who wish to demutualize early. However, the majority of the institutions in our sample do so by approximately eight years after conversion, and this is where the second spike in the hazard occurs. Finally, upon estimating the model with Cox’s (1975) semi-parametric partial likelihood approach, we find the probability that a converted institution will issue an IPO is influenced to a large extent by various measures that capture asset quality, in particular through measures that are equity driven. However, contrary to what one might expect, we find that total assets do not appear to influence the hazard rate.

Keywords: Credit Unions; Demutualization; Hazard Analysis; IPO (search for similar items in EconPapers)
JEL-codes: C41 G20 G21 L33 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2008-04
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Published in Journal of Economics and Finance, 34 (4), October 2010, pp. 391 - 414.

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