An Empirical Investigation of Going Public Decision of Indian Companies

This paper examines the determinant factors of going public decision of the Indian firms. Both pre IPO and post IPO factors are identified. Pre IPO factors are identified by comparing pre IPO characteristics of public firms with that of private firms using a probit regression model. Post IPO factors...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Mayur, Manas, Kumar, Manoj
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2006
Subjects
Going public
Initial public offerings
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Summary:This paper examines the determinant factors of going public decision of the Indian firms. Both pre IPO and post IPO factors are identified. Pre IPO factors are identified by comparing pre IPO characteristics of public firms with that of private firms using a probit regression model. Post IPO factors are identified by examining the consequences of IPO on firm specific variables like insider's ownership, capital expenditure, investment and cost of credit. The pre-IPO probit analysis identified the firm's --- size, age, profitability, sales growth, level of disclosures, market risk, asset risk and cost of credit to be the significant determinants of its going public decision. The post-IPO analysis suggests that firms do IPOs to finance their growth and investments, diversify owner's risk and reduce financial leverage and weak evidence to suggest that firms do IPO to bargain for a lower cost of credit.