2003/10/01 by James C. Brau, James C. Brau, Bill Francis +2 · 2 citations
Business, Management and Accounting · #Corporate Finance and Governance #Auditing, Earnings Management, Governance #Financial Reporting and Valuation Research
paper · doi:10.1086/377032
We examine factors that influence the choice between an initial public offering (IPO) and a takeover by a public acquirer. Our results show that the industry concentration, high-tech industry affiliation, current cost of debt, relative "hotness" of the IPO market, firm size, and insider ownership percentage are all positively related to the probability of an IPO. In contrast, private companies in high market-to-book industries, financial service sectors, highly leveraged industries, and deals involving greater liquidity for selling insiders show a stronger likelihood for takeovers. Our findings also indicate that a liquidity discount exists in takeovers relative to IPOs.