How profitability affects the decision form going public to private ?Â
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Profitability plays a crucial role in the decision-making process of firms regarding going public or staying private. Research indicates that higher profitability positively influences the value of publicly listed insurance companies. Additionally, when firms consider going public, they weigh the benefits of raising capital against the costs of disclosing sensitive information. Moreover, after an initial public offering (IPO), firm profitability tends to decline, especially for firms with more volatile profitability. Furthermore, firms in more profitable industries are more inclined to go public to strengthen their market position, while those in competitive industries with smaller market shares may opt to remain private to protect confidential information. Thus, profitability impacts the decision to go public or stay private by influencing firm value, disclosure considerations, and market positioning.
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| Papers (5) | Insight |
|---|---|
| Firms in more profitable industries are more likely to go public to gain market share and deter new entrants, balancing benefits and costs of disclosing information. | |
| Profitability influences the decision to go public or stay private; firms may experience a post-IPO profitability drop, especially if profitability is volatile or average profitability is uncertain. | |
| Profitability influences the decision to go public or stay private by impacting optimal leverage and disclosure policies, which are intertwined due to information externalities and costly-state-verification. | |
31 May 2020 | Not addressed in the paper. |
| Profitability influences the decision to go public or stay private. Higher expected future profitability favors going public, but post-IPO, firm profitability tends to decline, especially for volatile and less uncertain firms. |
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