Why Do Companies Go Public.Pdf

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Why Do Companies Go Public? An Empirical Analysis Author(s): Marco Pagano, Fabio Panetta, Luigi Zingales Source: The Journal of Finance, Vol. 53, No. 1 (Feb., 1998), pp. 27-64 Published by: Blackwell Publishing for the American Finance Association Stable URL: http://www.jstor.org/stable/117434 . Accessed: 24/08/2011 01:33

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Why Do Companies Go Public? An Empirical Analysis

MARCO PAGANO, FABIO PANETTA, and LUIGI ZINGALES* ABSTRACT Using a large database of private firms in Italy, we analyze the determinants of initial public offerings (IPOs) by comparingthe 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-bookratio. 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.

TO THE DECISION GO PUBLICis one of the most important and least studied questions in corporate finance. Most corporate finance textbooks limit themselves to describing the institutional aspects of this decision, providing only a few remarks on its motivation....