Optimal IPO Timing in an Exchange Economy
نویسندگان
چکیده
We model the IPO decision of an entrepreneur in an exchange economy. The entrepreneur holds a Lucas Tree, and when the IPO occurs, the market converges to a Two Trees economy built on Cochrane, Longstaff, and Santa-Clara (2008). We solve the optimal timing problem and study the diversification effects over the firm’s value and entrepreneur’s consumption. The model predicts that IPOs should be correlated with the firm’s size and explains why firms with lower betas are expected to IPO first.
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