IDEAS home Printed from https://ideas.repec.org/a/kap/rqfnac/v37y2011i3p325-361.html
   My bibliography  Save this article

The IPO market as a screening device and the going public decision: evidence from acquisitions of privately and publicly held firms

Author

Listed:
  • Tomas Mantecon
  • Paul Thistle

Abstract

No abstract is available for this item.

Suggested Citation

  • Tomas Mantecon & Paul Thistle, 2011. "The IPO market as a screening device and the going public decision: evidence from acquisitions of privately and publicly held firms," Review of Quantitative Finance and Accounting, Springer, vol. 37(3), pages 325-361, October.
    • Handle: RePEc:kap:rqfnac:v:37:y:2011:i:3:p:325-361
    DOI: 10.1007/s11156-010-0207-y
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11156-010-0207-y
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11156-010-0207-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. repec:bla:jfinan:v:43:y:1988:i:4:p:789-822 is not listed on IDEAS
    2. Bergstresser, Daniel & Philippon, Thomas, 2006. "CEO incentives and earnings management," Journal of Financial Economics, Elsevier, vol. 80(3), pages 511-529, June.
    3. Barclay, Michael J. & Holderness, Clifford G., 1989. "Private benefits from control of public corporations," Journal of Financial Economics, Elsevier, vol. 25(2), pages 371-395, December.
    4. Hsuan‐Chi Chen & Jay R. Ritter, 2000. "The Seven Percent Solution," Journal of Finance, American Finance Association, vol. 55(3), pages 1105-1131, June.
    5. Bradley, Daniel J. & Jordan, Bradford D., 2002. "Partial Adjustment to Public Information and IPO Underpricing," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(4), pages 595-616, December.
    6. Mantecon, Tomas, 2008. "An analysis of the implications of uncertainty and agency problems on the wealth effects to acquirers of private firms," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 892-905, May.
    7. Luigi Zingales, 1995. "What Determines the Value of Corporate Votes?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 1047-1073.
    8. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    9. Officer, Micah S., 2007. "The price of corporate liquidity: Acquisition discounts for unlisted targets," Journal of Financial Economics, Elsevier, vol. 83(3), pages 571-598, March.
    10. Gaspar, Jose-Miguel & Massa, Massimo & Matos, Pedro, 2005. "Shareholder investment horizons and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 76(1), pages 135-165, April.
    11. Faccio, Mara & McConnell, John J. & Stolin, David, 2006. "Returns to Acquirers of Listed and Unlisted Targets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 41(1), pages 197-220, March.
    12. Hamish Anderson & Ben Marshall, 2007. "Takeover motives in a weak regulatory environment surrounding a market shock: a case study of New Zealand with a comparison of Gondhalekar and Bhagwat’s (2003) US findings," Review of Quantitative Finance and Accounting, Springer, vol. 29(1), pages 53-67, July.
    13. repec:bla:jfinan:v:59:y:2004:i:2:p:537-600 is not listed on IDEAS
    14. Shleifer, Andrei & Vishny, Robert W., 2003. "Stock market driven acquisitions," Journal of Financial Economics, Elsevier, vol. 70(3), pages 295-311, December.
    15. Fama, Eugene F. & French, Kenneth R., 1997. "Industry costs of equity," Journal of Financial Economics, Elsevier, vol. 43(2), pages 153-193, February.
    16. Hsuan-Chi Chen & Wen-Chung Guo, 2010. "Divergence of opinion and initial public offerings," Review of Quantitative Finance and Accounting, Springer, vol. 34(1), pages 59-79, January.
    17. Tim Loughran & Jay R. Ritter, 2002. "Why Don't Issuers Get Upset About Leaving Money on the Table in IPOs?," The Review of Financial Studies, Society for Financial Studies, vol. 15(2), pages 413-444, March.
    18. Diamond, Douglas W, 1985. "Optimal Release of Information by Firms," Journal of Finance, American Finance Association, vol. 40(4), pages 1071-1094, September.
    19. Chitru S. Fernando & Srinivasan Krishnamurthy & Paul A. Spindt, 2002. "Is the Offer Price in IPOs Informative? Underpricing, Ownership Structure, and Performance," Center for Financial Institutions Working Papers 01-33, Wharton School Center for Financial Institutions, University of Pennsylvania.
    20. Thomas J. Chemmanur & Shan He & Debarshi K. Nandy, 2010. "The Going-Public Decision and the Product Market," The Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1855-1908.
    21. Hanley, Kathleen Weiss, 1993. "The underpricing of initial public offerings and the partial adjustment phenomenon," Journal of Financial Economics, Elsevier, vol. 34(2), pages 231-250, October.
    22. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 32(2), pages 371-387, May.
    23. Laura Casares Field & Jonathan M. Karpoff, 2002. "Takeover Defenses of IPO Firms," Journal of Finance, American Finance Association, vol. 57(5), pages 1857-1889, October.
    24. Greene, William, 1998. "Sample selection in credit-scoring models1," Japan and the World Economy, Elsevier, vol. 10(3), pages 299-316, July.
    25. Ellingsen, Tore & Rydqvist, Kristian, 1997. "The Stock Market as a Screening Device and the Decision to Go Public," SSE/EFI Working Paper Series in Economics and Finance 174, Stockholm School of Economics.
    26. Marco Pagano & Ailsa Röell, 1998. "The Choice of Stock Ownership Structure: Agency Costs, Monitoring, and the Decision to Go Public," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(1), pages 187-225.
    27. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
    28. Moeller, Sara B. & Schlingemann, Frederik P. & Stulz, Rene M., 2004. "Firm size and the gains from acquisitions," Journal of Financial Economics, Elsevier, vol. 73(2), pages 201-228, August.
    29. Weisbach, Michael S., 1988. "Outside directors and CEO turnover," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 431-460, January.
    30. Reuer, Jeffrey J. & Shen, Jung-Chin, 2004. "Sequential divestiture through initial public offerings," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 249-266, June.
    31. Bargeron, Leonce L. & Schlingemann, Frederik P. & Stulz, René M. & Zutter, Chad J., 2008. "Why do private acquirers pay so little compared to public acquirers?," Journal of Financial Economics, Elsevier, vol. 89(3), pages 375-390, September.
    32. James C. Brau & Stanley E. Fawcett, 2006. "Initial Public Offerings: An Analysis of Theory and Practice," Journal of Finance, American Finance Association, vol. 61(1), pages 399-436, February.
    33. Ang, James & Kohers, Ninon, 2001. "The Take-Over Market for Privately Held Companies: The US Experience," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(6), pages 723-748, November.
    34. Tim Loughran & Jay Ritter, 2004. "Why Has IPO Underpricing Changed Over Time?," Financial Management, Financial Management Association, vol. 33(3), Fall.
    35. D. E. Allen & A. Soongswang, 2006. "Post-Takeover Effects on Thai Bidding Firms: Are Takeovers in the Bidder's Interests?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 9(04), pages 509-531.
    36. Kensuke Tetsuya, 2005. "Client Firms and Bank Mergers: Positive Wealth Effect of Bank Mergers on Distressed Firms," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 113-130.
    37. Luigi Zingales, 1995. "Insider Ownership and the Decision to Go Public," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(3), pages 425-448.
    38. Brennan, M. J. & Franks, J., 1997. "Underpricing, ownership and control in initial public offerings of equity securities in the UK," Journal of Financial Economics, Elsevier, vol. 45(3), pages 391-413, September.
    39. Mello, Antonio S. & Parsons, John E., 1998. "Going public and the ownership structure of the firm," Journal of Financial Economics, Elsevier, vol. 49(1), pages 79-109, July.
    40. repec:bla:jfinan:v:53:y:1998:i:2:p:773-784 is not listed on IDEAS
    41. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    42. James C. Brau & Bill Francis & Ninon Kohers, 2003. "The Choice of IPO versus Takeover: Empirical Evidence," The Journal of Business, University of Chicago Press, vol. 76(4), pages 583-612, October.
    43. Diamond, Douglas W & Verrecchia, Robert E, 1991. "Disclosure, Liquidity, and the Cost of Capital," Journal of Finance, American Finance Association, vol. 46(4), pages 1325-1359, September.
    44. Nenova, Tatiana, 2003. "The value of corporate voting rights and control: A cross-country analysis," Journal of Financial Economics, Elsevier, vol. 68(3), pages 325-351, June.
    45. John Koeplin & Atulya Sarin & Alan C. Shapiro, 2000. "The Private Company Discount," Journal of Applied Corporate Finance, Morgan Stanley, vol. 12(4), pages 94-101, January.
    46. Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring.
    47. Boyes, William J. & Hoffman, Dennis L. & Low, Stuart A., 1989. "An econometric analysis of the bank credit scoring problem," Journal of Econometrics, Elsevier, vol. 40(1), pages 3-14, January.
    48. Ritter, Jay R., 1987. "The costs of going public," Journal of Financial Economics, Elsevier, vol. 19(2), pages 269-281, December.
    49. Kathleen Fuller & Jeffry Netter & Mike Stegemoller, 2002. "What Do Returns to Acquiring Firms Tell Us? Evidence from Firms That Make Many Acquisitions," Journal of Finance, American Finance Association, vol. 57(4), pages 1763-1793, August.
    50. Kim, Moonchul & Ritter, Jay R., 1999. "Valuing IPOs," Journal of Financial Economics, Elsevier, vol. 53(3), pages 409-437, September.
    51. Ben Sopranzetti & Emilio Venezian & Xiaoli Wang, 2006. "The Market for New Issues: Impact of Offering Price on Price Support and Underpricing," Review of Quantitative Finance and Accounting, Springer, vol. 26(2), pages 165-176, March.
    52. Seguin, P. J. & Smoller, M. M., 1997. "Share price and mortality: An empirical evaluation of newly listed Nasdaq stocks," Journal of Financial Economics, Elsevier, vol. 45(3), pages 333-363, September.
    53. Lowry, Michelle & Schwert, G. William, 2004. "Is the IPO pricing process efficient?," Journal of Financial Economics, Elsevier, vol. 71(1), pages 3-26, January.
    54. DeAngelo, Harry & DeAngelo, Linda, 1985. "Managerial ownership of voting rights : A study of public corporations with dual classes of common stock," Journal of Financial Economics, Elsevier, vol. 14(1), pages 33-69, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Inga Chira & Luis García-Feijóo & Jeff Madura, 2017. "When do managers listen to the market? Impact of learning in acquisitions of private firms," Review of Quantitative Finance and Accounting, Springer, vol. 49(2), pages 515-543, August.
    2. Lian, Qin & Wang, Qiming, 2012. "Acquisition valuations of withdrawn IPOs: When IPO plans turn into mergers," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1424-1436.
    3. Valérie Revest & Alessandro Sapio, 2016. "Graduation and sell-out strategies in the Alternative Investment Market," Discussion Papers 4_2016, CRISEI, University of Naples "Parthenope", Italy.
    4. Yun Meng & Ninon K. Sutton, 2017. "Is the grass on the other side greener? Testing the cross-border effect for U.S. acquirers," Review of Quantitative Finance and Accounting, Springer, vol. 48(4), pages 917-937, May.
    5. Helbing, Pia, 2019. "A review on IPO withdrawal," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 200-208.
    6. Cosimo Abbate & Alessandro Sapio, 2016. "Gazelles and muppets in the City: Stock market listing, risk sharing, and firm growth quantiles," LEM Papers Series 2016/33, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    7. Inga Chira & Luis Garcia-Feijoo & Jeff Madura, 2019. "Use of reference point theory to explain the price paid for private targets," Review of Quantitative Finance and Accounting, Springer, vol. 53(2), pages 465-491, August.
    8. Troy Pollard, 2016. "Sneaking in the back door? An evaluation of reverse mergers and IPOs," Review of Quantitative Finance and Accounting, Springer, vol. 47(2), pages 305-341, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mantecon, Tomas, 2008. "An analysis of the implications of uncertainty and agency problems on the wealth effects to acquirers of private firms," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 892-905, May.
    2. Smart, Scott B. & Zutter, Chad J., 2003. "Control as a motivation for underpricing: a comparison of dual and single-class IPOs," Journal of Financial Economics, Elsevier, vol. 69(1), pages 85-110, July.
    3. Mayur, Manas & Kumar, Manoj, 2006. "An Empirical Investigation of Going Public Decision of Indian Companies," MPRA Paper 1801, University Library of Munich, Germany.
    4. Jianping Qi & Ninon K. Sutton & Qiancheng Zheng, 2015. "The Value of Strategic Alliances in Acquisitions and IPOs," Financial Management, Financial Management Association International, vol. 44(2), pages 387-430, June.
    5. Shams, Syed, 2021. "Competition in the acquisition market and returns to bidders in Australia," Research in International Business and Finance, Elsevier, vol. 55(C).
    6. Li, Lin & Tong, Wilson H.S., 2018. "Information uncertainty and target valuation in mergers and acquisitions," Journal of Empirical Finance, Elsevier, vol. 45(C), pages 84-107.
    7. Eckbo, B. Espen, 2009. "Bidding strategies and takeover premiums: A review," Journal of Corporate Finance, Elsevier, vol. 15(1), pages 149-178, February.
    8. Brau, James C. & Sutton, Ninon K. & Hatch, Nile W., 2010. "Dual-track versus single-track sell-outs: An empirical analysis of competing harvest strategies," Journal of Business Venturing, Elsevier, vol. 25(4), pages 389-402, July.
    9. Ehrhardt, Olaf & Lahr, Henry, 2008. "Uncertain private benefits and the decision to go public," CEFS Working Paper Series 2008-02, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    10. Helwege, Jean & Packer, Frank, 2009. "Private matters," Journal of Financial Intermediation, Elsevier, vol. 18(3), pages 362-383, July.
    11. Tilan Tang, 2015. "Bidder's Gain: Evidence from Termination Returns," International Review of Finance, International Review of Finance Ltd., vol. 15(4), pages 457-487, December.
    12. Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, August.
    13. Blomkvist, Magnus & Korkeamäki, Timo & Takalo, Tuomas, 2022. "Learning and staged equity financing," Journal of Corporate Finance, Elsevier, vol. 74(C).
    14. Shams, Syed M.M. & Gunasekarage, Abeyratna & Colombage, Sisira R.N., 2013. "Does the organisational form of the target influence market reaction to acquisition announcements? Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 24(C), pages 89-108.
    15. Ljungqvist, Alexander, 2003. "Conflicts of Interest and Efficient Contracting in IPOs," CEPR Discussion Papers 4163, C.E.P.R. Discussion Papers.
    16. Fich, Eliezer M. & Harford, Jarrad & Tran, Anh L., 2015. "Motivated monitors: The importance of institutional investors׳ portfolio weights," Journal of Financial Economics, Elsevier, vol. 118(1), pages 21-48.
    17. Andrew J. Leone & Steve Rock & Michael Willenborg, 2007. "Disclosure of Intended Use of Proceeds and Underpricing in Initial Public Offerings," Journal of Accounting Research, Wiley Blackwell, vol. 45(1), pages 111-153, March.
    18. Liu, Xiaoding & Ritter, Jay R., 2011. "Local underwriter oligopolies and IPO underpricing," Journal of Financial Economics, Elsevier, vol. 102(3), pages 579-601.
    19. Xiaotao (Kelvin) Liu & Biyu Wu, 2021. "Do IPO Firms Misclassify Expenses? Implications for IPO Price Formation and Post-IPO Stock Performance," Management Science, INFORMS, vol. 67(7), pages 4505-4531, July.
    20. Annette B. Poulsen & Mike Stegemoller, 2008. "Moving from Private to Public Ownership: Selling Out to Public Firms versus Initial Public Offerings," Financial Management, Financial Management Association International, vol. 37(1), pages 81-101, March.

    More about this item

    Keywords

    IPO; Merger; Private equity; Screening; Adverse selection; G32; G34;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:rqfnac:v:37:y:2011:i:3:p:325-361. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.