Keywords

IPO motivation, underpricing and signaling, private ownership control

Abstract

We survey 336 CFOs to compare practice to theory in the areas of IPO motivation, timing, underwriter selection, underpricing, signaling, and the decision to remain private. We find the primary motivation for going public is for acquisition purposes. CFOs base IPO timing on overall market conditions, are well-informed regarding expected underpricing, and feel underpricing compensates investors for taking risk. The most important positive signal is past historical earnings, followed by underwriter certification. CFOs have divergent opinions about the IPO process depending on firm-specific characteristics. Finally, we find the main reason for remaining private is to preserve decision-making control and ownership.

Original Publication Citation

Initial Public Offerings: An Analysis of Theory and Practice, with Stan Fawcett, Journal of Finance, Vol. 61 (February), 2006, 399-436. This paper was reprinted as a book chapter in: The International Library of Entrepreneurship: Strategies for New Venture Development, Ed. Ari Ginsberg, 2010.

Document Type

Peer-Reviewed Article

Publication Date

2004

Publisher

Journal of Finance

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Full Professor

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