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The Initial Public Offerings of Listed Firms

Author

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  • FRANÇOIS DERRIEN
  • AMBRUS KECSKÉS

Abstract

A number of firms in the United Kingdom list without issuing equity and then issue equity shortly thereafter. We argue that this two‐stage offering strategy is less costly than an initial public offering (IPO) because trading reduces the valuation uncertainty of these firms before they issue equity. We find that initial returns are 10% to 30% lower for these firms than for comparable IPOs, and we provide evidence that the market in the firm's shares lowers financing costs. We also show that these firms time the market both when they list and when they issue equity.

Suggested Citation

  • François Derrien & Ambrus Kecskés, 2007. "The Initial Public Offerings of Listed Firms," Journal of Finance, American Finance Association, vol. 62(1), pages 447-479, February.
    • Handle: RePEc:bla:jfinan:v:62:y:2007:i:1:p:447-479
    DOI: 10.1111/j.1540-6261.2007.01212.x
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