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Strategic waiting in the IPO markets
Authors:Gönül Çolak  Hikmet Günay
Affiliation:1. Nova School of Business and Economics, INOVA Universidade Nova de Lisboa, Campus de Campolide, 1099-032 Lisbon, Portugal;2. Department of Strategy and Entrepreneurship, College of Business, Oregon State University, 400 Bexel Hall, Corvallis, OR 97330, United States;1. The Olayan School of Business, American University in Beirut, Lebanon;2. Cardiff Business School, Cardiff University, United Kingdom;3. European Corporate Governance Institute, Belgium;1. University of Bologna, Department of Management, Via Capo di Lucca 34, 40126 Bologna, Italy;2. University of Lugano, IALS, Via G. Buffi 13, 6904 Lugano, Switzerland;1. School of Finance, Shandong University of Finance and Economics Jinan, China;2. Department of Finance, National Taiwan University Taipei, Taiwan
Abstract:The paper analyzes the strategic waiting tendencies of IPO firms. Our game theoretic model shows why some high-quality firms may strategically delay their initial public offering until a favorable signal about the economic conditions is generated by other issuing firms. Survival analysis suggests that IPOs in the highest quality decile have significantly higher median waiting days (since the start of a rising IPO cycle) than the IPOs in the lowest decile. During the early stages of an expanding IPO cycle the average firm quality is lower than in its later stages. We find supporting evidence also from the IPOs of future S&P 500 firms.
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