FIN-04-002 |
NYU Stern School of Business |
February 2004
Ekkehart Boehmer and Alexander Ljungqvist
ABSTRACT
We test recent theories of when companies go public which predict that 1) more companies will go
public when outside valuations are high or have increased, 2) companies prefer going public when
uncertainty about their future profitability is high, and 3) firms whose controlling shareholders enjoy
large private benefits of control are less likely to go public. Our analysis tracks a set of 330 privatelyheld
German firms which between 1984 and 1995 announced their intention to go public to see
whether, when, and how they subsequently sold equity to outside investors. Controlling for private
benefits, we find that the likelihood of firms completing an initial public offering increases in the
firm’s investment opportunities and valuations. We also show that these effects are distinct from
factors that increase firms’ demand for outside capital more generally.
Classification: G32
Alexander Ljungqvist
Institution: Stern School of Business, New York University
Phone: (212) 998-0304
Fax: (212) 995-4233
Email: aljungqv@stern.nyu.edu
Home Page: http://www.stern.nyu.edu/~aljungqv
Ekkehart Boehmer
Institution: Mays Business School, Texas A&M University 306L Wehner Building College Station, TX 77845
Email: eboehmer@cgsb.tamu.edu
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