Product Market Characteristics and the Choice between IPOs and Acquisitions

Abstract

[evdate 2014-12-04] IAS Conference on Entrepreneurship and Finance. Talk no.7 Title from event program.

'IAS Conference on Entrepreneurship and Finance, paper presentation II.'

IAS Conference on Entrepreneurship and Finance, held 4 Dec., 2014, at the Hong Kong University of Science and Technology. Sponsor, HKUST Jockey Club Institute for Advanced Study, and co-sponsor by Center for Asian Financial Markets, Department of Finance, HKUST.

Abstract: Using unique U.S. Census datasets, we analyze how entrepreneurial firms' product market characteristics affect their choice between going public, being acquired, or remaining private. Total factor productivity (TFP), size, sales growth, market share, capital expenditure, human capital intensiveness, and access to private funding significantly increase a private firm's likelihood of an IPO relative to an acquisition. Firms in industries with less information asymmetry and higher stock liquidity are more likely to choose an IPO instead of an acquisition. While TFP peaks around either form of exit, the rate of increase in TFP prior to acquisitions and the subsequent decrease is smaller than that around IPOs.

Duration: 35 min.