Where Have All the IPOs Gone
TLDR
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.read more
Citations
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How much do top management teams matter in founder-led firms?
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Declining propensity to pay? A re-examination of the lifecycle theory
Monica Banyi,Kathleen M. Kahle +1 more
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Impact of market-based finance on SMEs failure
Jairaj Gupta,Andros Gregoriou +1 more
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Are U.S. Industries Becoming More Concentrated
TL;DR: The authors found that firms in industries with the largest decline in the number of publicly-traded firms have higher profit margins and abnormal stock returns, and enjoyed better investment opportunities through M&A deals.
References
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The structure and governance of venture-capital organizations
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.
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Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk
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Do Brokerage Analysts' Recommendations Have Investment Value?
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.
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Venture capitalists and the decision to go public
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.