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1.
Using a hand-collected data set of private firm acquisitions and IPOs, this paper develops the first empirical analysis in the literature of the “IPO valuation premium puzzle,” which refers to a situation where many private firms choose to be acquired rather than to go public at higher valuations. We also test several new hypotheses regarding a private firm's choice between IPOs and acquisitions. Our analysis of private firm valuations in IPOs and acquisitions indicates that IPO valuation premia disappear for larger VC backed firms after controlling for various observable factors affecting a firm's propensity to choose IPOs over acquisitions. Further, after controlling for the long-run component of the expected payoff to firm insiders from an IPO exit, we find that the IPO valuation premium vanishes even for larger non-VC backed firms and shrinks substantially for smaller firms as well. Our Heckman-style treatment effects regression analysis demonstrates that the above results are robust to controlling for the selection of exit mechanism by firm insiders based on unobservables. Our findings on private firms' choice between IPOs and acquisitions can be summarized as follows. First, firms operating in industries characterized by the absence of a dominant market player (and therefore more viable against product market competition) are more likely to go public rather than to be acquired. Second, more capital intensive firms, those operating in industries characterized by greater private benefits of control, and those which are harder to value by IPO market investors are more likely to go public rather than to be acquired. Third, the likelihood of an IPO over an acquisition is greater for venture backed firms and those characterized by higher pre-exit sales growth.  相似文献   

2.
This paper investigates the effects of going public on innovation by comparing the innovation activity of firms that go public with firms that withdraw their initial public offering (IPO) filing and remain private. NASDAQ fluctuations during the book‐building phase are used as an instrument for IPO completion. Using patent‐based metrics, I find that the quality of internal innovation declines following the IPO, and firms experience both an exodus of skilled inventors and a decline in the productivity of the remaining inventors. However, public firms attract new human capital and acquire external innovation. The analysis reveals that going public changes firms' strategies in pursuing innovation.  相似文献   

3.
We document that public firms participate more than private firms as buyers and sellers of assets in merger waves and their participation is affected more by credit spreads and aggregate market valuation. Public firm acquisitions realize higher gains in productivity, particularly for on‐the‐wave acquisitions and when the acquirer's stock is liquid and highly valued. Our results are not driven solely by public firms' better access to capital. Using productivity data from early in the firm's life, we find that better private firms subsequently select to become public. Initial size and productivity predict asset purchases and sales 10 and more years later.  相似文献   

4.
We examine whether and how industry peers use tax avoidance as a strategic mechanism to maintain their relative competitive positions. We exploit a unique setting where a relatively large private firm obtains capital, visibility, and creditability by going public (i.e., an IPO), imposing significant competitive pressure on its industry peers. We find that peer firms increase tax avoidance after large IPOs. Further analysis shows that the increase of tax avoidance is driven by firms with high growth needs and firms with high operating uncertainty, suggesting that tax aggressiveness is aligned with other strategic risk-taking changes to improve industry competitiveness. We rule out two alternative explanations: 1) existing peers use relative product market power to hedge against tax risk and engage in tax avoidance; 2) peers mimic the tax avoidance behavior of IPO firms. The main finding is supported by the difference-in-differences test with coarsened exact matching and a battery of robustness tests, including alternative measures and alternative large IPO selection criteria.  相似文献   

5.
The main purpose of this paper is using a unique data set from IPO filings to study the IPO market as a screening device and the going public decision. We find that private firms that are less likely to have the option to access public equity markets receive 54 cents for each dollar they expected to raise in an IPO, whereas firms that are more likely to have the option to go public but sell privately sell at $1.11 for each dollar they expected to receive at the IPO. This result suggests that the lower valuation for firms sold in private markets compared to firms sold in public markets can be at least partially explained by the lower relative bargaining power of private firms. However, owners that took their firms public before selling received, on average, 40% larger payoffs than owners that had the option to go public but decided to sell privately. The results in this study indicate that these differences in valuation are not fully explained by existing theoretical models on the decision to sell privately or in two stages.  相似文献   

6.
Rational IPO Waves   总被引:2,自引:0,他引:2  
We argue that the number of firms going public changes over time in response to time variation in market conditions. We develop a model of optimal initial public offering (IPO) timing in which IPO waves are caused by declines in expected market return, increases in expected aggregate profitability, or increases in prior uncertainty about the average future profitability of IPOs. We test and find support for the model's empirical predictions. For example, we find that IPO waves tend to be preceded by high market returns and followed by low market returns.  相似文献   

7.
This paper studies the performance of publicly held firms in the US property-liability insurance industry by analyzing companies that issued initial public offerings (IPOs) from 1994 to 2005, using private firms as the benchmark. I investigate ex ante determinants and ex post effects of IPOs on firm efficiency, operating performance, and other financials. I also analyze stock returns and follow-on SEO and acquisition activities to provide further information on IPO motivation. The paper finds that the likelihood of an IPO significantly increases with firm size and premium growth. IPO firms experience no post-issue underperformance in efficiency, operations, or stock returns; register improvement in allocative and cost efficiency; and reduce financial leverage and reinsurance usage. Moreover, IPO firms are active in follow-on SEO issues and acquisition activities. The findings are mostly consistent with the theory that firms go public for easier access to capital and to ease capital constraints.  相似文献   

8.
We examine firms' incentives to go public in the presence of product market competition. As a result of their greater ability to diversify idiosyncratic risk in the capital market, public firms' owners tolerate higher profit variability than owners of private firms. Consequently, public firms adopt riskier and more aggressive output market strategies than private firms, which improves the competitive position of the former vis-à-vis the latter. This strategic benefit of being public, and thus, the proportion of public firms in an industry, is shown to be positively related to the degree of competitive interaction among firms in the output market, to demand uncertainty, and to the idiosyncratic portion of this uncertainty. Additional empirical predictions concern the effect of a firm's initial public offering on its market share and on its rivals' valuations. We test the model's predictions and find empirical support for most of them.  相似文献   

9.
We study two alternative means to move assets from private to public ownership: through the acquisition of private companies by firms that are public (sellouts) or through initial public share offerings (IPOs). We consider firm-specific characteristics for 1,074 IPO and 735 sellout firms to identify differences in growth, capital constraints, and asymmetric information between the two types of transactions. Our results suggest that firms move to public ownership through an IPO when they have greater growth opportunities and face more capital constraints. We provide a better understanding of the firm-specific characteristics that lead firms to go public.  相似文献   

10.
How Persistent Is the Impact of Market Timing on Capital Structure?   总被引:9,自引:0,他引:9  
This paper examines the capital structure implications of market timing. I isolate timing attempts in a single major financing event, the initial public offering, by identifying market timers as firms that go public in hot issue markets. I find that hot‐market IPO firms issue substantially more equity, and lower their leverage ratios by more, than cold‐market firms do. However, immediately after going public, hot‐market firms increase their leverage ratios by issuing more debt and less equity relative to cold‐market firms. At the end of the second year following the IPO, the impact of market timing on leverage completely vanishes.  相似文献   

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