scispace - formally typeset
Search or ask a question
Journal ArticleDOI

Where Have All the IPOs Gone

TL;DR: In this article, the authors propose an alternative explanation for the decline in the number of initial public offerings in the United States: the advantages of selling out to a larger organization, which can speed a product to market and realize economies of scope, have increased relative to the benefits of operating as an independent firm.
Abstract: During 1980–2000, an average of 310 companies per year went public in the United States. Since 2000, the average has been only 99 initial public offerings (IPOs) per year, with the drop especially precipitous among small firms. Many have blamed the Sarbanes-Oxley Act of 2002 and the 2003 Global Settlement’s effects on analyst coverage for the decline in IPO activity. We find very little support for the conventional wisdom, and we offer an alternative explanation. Our economies of scope hypothesis posits that the advantages of selling out to a larger organization, which can speed a product to market and realize economies of scope, have increased relative to the benefits of operating as an independent firm.

Content maybe subject to copyright    Report

Citations
More filters
Journal ArticleDOI
TL;DR: In this article, the authors compare the regulation around the world and discuss how this impacts the development of markets and investigate the signaling role played toward external investors by equity retention and social capital.
Abstract: This paper makes two contributions to research on the new entrepreneurial finance context of equity crowdfunding. First, we compare its regulation around the world and discuss how this impacts the development of markets. Second, we investigate the signaling role played toward external investors by equity retention and social capital. Using a sample of 271 projects listed on the UK platforms Crowdcube and Seedrs in the period 2011–2014, we find that campaigns launched by entrepreneurs (1) who sold smaller fraction of their companies at listing and (2) had more social capital had higher probabilities of success. Our results combine findings in classical entrepreneurial finance settings, like venture capital and IPOs, with evidence from other, non-equity crowdfunding markets.

399 citations

ReportDOI
TL;DR: This article studied the evolution of market power based on firm-level data for the U.S. economy since 1955 and measured both markups and profitability, and discussed the macroeconomic implications of an increase in average market power, which can account for a number of secular trends in the past four decades.
Abstract: We document the evolution of market power based on firm-level data for the U.S. economy since 1955. We measure both markups and profitability. In 1980, aggregate markups start to rise from 21% above marginal cost to 61% now. The increase is driven mainly by the upper tail of the markup distribution: the upper percentiles have increased sharply. Quite strikingly, the median is unchanged. In addition to the fattening upper tail of the markup distribution, there is reallocation of market share from low- to high-markup firms. This rise occurs mostly within industry. We also find an increase in the average profit rate from 1% to 8%. Although there is also an increase in overhead costs, the markup increase is in excess of overhead. We discuss the macroeconomic implications of an increase in average market power, which can account for a number of secular trends in the past four decades, most notably the declining labor and capital shares as well as the decrease in labor market dynamism.

243 citations

Journal ArticleDOI
TL;DR: In this paper, the authors show that the shape of the firm employment growth distribution changes substantially in the post-2000 period and the overall decline reflects a sharp drop in the 90th percentile of the growth rate distribution accounted for by the declining share of young firms and the declining propensity for young firms to be high-growth firms.

235 citations

Journal ArticleDOI
TL;DR: The authors parse 10-K disclosures filed with the U.S. Securities and Exchange Commission (SEC) using a unique lexicon based on constraining words and find that the frequency of these words exhibits very low correlation with traditional measures of financial constraints and predicts subsequent liquidity events, such as dividend omissions or increases, equity recycling, and underfunded pensions.
Abstract: Measuring the extent to which a firm is financially constrained is critical in assessing capital structure. Extant measures of financial constraints focus on macro firm characteristics such as age and size, variables highly correlated with other firm attributes. We parse 10-K disclosures filed with the U.S. Securities and Exchange Commission (SEC) using a unique lexicon based on constraining words. We find that the frequency of constraining words exhibits very low correlation with traditional measures of financial constraints and predicts subsequent liquidity events, such as dividend omissions or increases, equity recycling, and underfunded pensions, better than widely used financial constraint indexes.

230 citations

Journal ArticleDOI
TL;DR: In this paper, the authors develop a theory of initial public offering (IPO) underpricing based on differentiated underwriting services and localized competition, and test their model implications on all-star analyst coverage, industry expertise, and other non-price dimensions.

200 citations

References
More filters
Journal ArticleDOI
TL;DR: The authors describes and analyzes the structure of VC organizations, focusing on the relationship between investors and venture capitalists and between venture-capital firms and the ventures in which they invest, and contrasts VC organizations with large, publicly traded corporations and with leveraged buyout organizations.

2,686 citations

Journal ArticleDOI
TL;DR: In this paper, the authors used a disaggregated approach to study the volatility of common stocks at the market, industry, and firm levels and found that over the period from 1962 to 1997 there has been a noticeable increase in firm-level volatility relative to market volatility.
Abstract: This paper uses a disaggregated approach to study the volatility of common stocks at the market, industry, and firm levels. Over the period from 1962 to 1997 there has been a noticeable increase in firm-level volatility relative to market volatility. Accordingly, correlations among individual stocks and the explanatory power of the market model for a typical stock have declined, whereas the number of stocks needed to achieve a given level of diversification has increased. All the volatility measures move together countercyclically and help to predict GDP growth. Market volatility tends to lead the other volatility series. Factors that may be responsible for these findings are suggested.

1,950 citations

Journal ArticleDOI
TL;DR: In this article, an analysis of new buy and sell recommendations of stocks by security analysts at major U.S. brokerage firms shows significant, systematic discrepancies between pre-recommendation prices and eventual values.
Abstract: An analysis of new buy and sell recommendations of stocks by security analysts at major U.S. brokerage firms shows significant, systematic discrepancies between prerecommendation prices and eventual values. The initial return at the time of the recommendations is large, even though few recommendations coincide with new public news or provide previously unavailable facts. However, these initial price reactions are incomplete. For buy recommendations, the mean postevent drift is

1,930 citations

Journal ArticleDOI
Josh Lerner1
TL;DR: This article examined the timing of initial public offerings and private financings by venture capitalists and found that seasoned VCs are particularly proficient at taking companies public near market peaks, and that these companies go public when equity valuations are high and employ private finance when values are lower.

974 citations