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Why Do Companies Go Public? An Empirical Analysis
Author(s) -
Pagano Marco,
Panetta Fabio,
Zingales Luigi
Publication year - 1998
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.25448
Subject(s) - initial public offering , business , investment (military) , ex ante , control (management) , finance , monetary economics , economics , management , law , macroeconomics , politics , political science
Using a large database of private firms in Italy, we analyze the determinants of initial public offerings (IPOs) by comparing the ex ante and ex post characteristics of IPOs with those of private firms. The likelihood of an IPO is increasing in the company's size and the industry's market‐to‐book ratio. Companies appear to go public not to finance future investments and growth, but to rebalance their accounts after high investment and growth. IPOs are also followed by lower cost of credit and increased turnover in control.