Going Public : Why ? ... and When ? Evidence from UK
نویسندگان
چکیده
Using a sample of 204 UK initial public offerings (IPOs), we empirically analyze the motive for and the timing of IPO decision by examining the determinants of IPO structure. Linked to IPO structure, the determinants of underpricing and the pattern of seasoned equity offerings (SEOs) are also investigated. The data reveal that younger and smaller firms tend to go public primarily for financing purpose, acquisition financing and carve-out being important reasons. Older and larger firms, in particular ICT firms are likely to go public both for financing and for their existing shareholders to cash out. The most established firms seem to utilise the IPOs only as an exit mechanism, although this is very rare in UK. Firms purely driven by financing needs time the market to offer when the market return is relatively lower, which is associated with lower underpricing costs. For either of the two types of IPO motives: raising funds for investment, or divesting and exit, corporate governance is an important consideration behind the IPO decisions – the firms tend to avoid putting the management’s control rights at risk. In the after-market, larger firms and firms belong to ICT industry are more likely to carry out seasoned equity offerings (SEOs), where they benefit from better offer prices; besides, they tend to time the market for their SEOs to exploit windows opportunities. Overall, the UK IPOs during the sample period are particularly associated with financing motives, and they distinctly differ from some other European IPOs. JEL classification: G32; G24
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