Leaders and followers in hot IPO markets

Banerjee, Shantanu; Güçbilmez, Ufuk; Pawlina, Grzegorz

doi:10.1016/j.jcorpfin.2016.01.004

Cited by 27 publications

(13 citation statements)

References 69 publications

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“…Within each IPO wave, the model predicts that leaders are of a higher quality than followers. This ordering is consistent with Banerjee et al (2016), who find that leaders in IPO waves obtain higher market-to-book ratios, despite being similar on other dimensions (e.g., sales, capital expenditures, profitability, and leverage). However, not all waves should be equal in this regard.…”

Section: Discussionsupporting

confidence: 88%

“…As previously mentioned, the first bullet point is consistent with recent empirical work connecting innovation and external financing. The second point is consistent with Banerjee, Güçbilmez, and Pawlina's (2016) recent study of initial public offering (IPO) waves. They argue that followers appear to be of lower quality than leaders on several dimensions, including valuation and underpricing.…”

Section: Related Literaturesupporting

confidence: 88%

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Making Waves: To Innovate or Be a Fast Second?

Yung¹

2016

J. Financ. Quant. Anal.

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Internal finance leads to a stalemate in innovation games; each firm wants to free-ride on the others' costly experimentation. When instead innovation is financed externally (e.g., with venture capital or initial public offerings), there is an endogenous cost to delay. Waiting to make risky irreversible investment conveys pessimistic information. I characterize the relative sizes of waves of leaders and followers in innovation cycles, and the endogenous, intertemporal distribution of quality as each wave builds and crashes. Finally, old waves leave an adverse selection "hangover," such that too much early innovation can cause the market for future innovation to break down. * Yung

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Section: Discussionsupporting

confidence: 88%

Section: Related Literaturesupporting

confidence: 88%

Making Waves: To Innovate or Be a Fast Second?

Yung¹

2016

J. Financ. Quant. Anal.

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“…We add to previous results about IPOs in Bustamante (2012) and Banerjee, Gucbilmez, and Pawlina (2016), by providing implications about the alternative to IPOs. Indeed, the separating equilibrium result predicts that worse firms tend to sell out.…”

Section: Introductionmentioning

confidence: 88%

“…arating equilibrium in Cases (II-i) and (II-ii) is consistent with the empirical evidence about IPOs. For instance, Bustamante (2012) and Banerjee, Gucbilmez, and Pawlina (2016) showed that firms with better growth opportunities go public earlier, while Pagano, Panetta, and Zingales (1998) showed that more profitable firms are more likely to go public. Most notably, the separating equilibrium results can also account for an empirical finding about selling out.…”

Section: Proposition 2 the Least-cost Equilibriummentioning

confidence: 99%

Selling out or going public? A real options signaling approach

Nishihara

2017

Finance Research Letters

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We examine a dynamic model in which a firm chooses between selling out and going public under asymmetric information. We show that information asymmetry tends to change the firm's policy from selling out to IPO. More precisely, a separating equilibrium can arise in which the good firm goes public while the bad firm follows the first-best sales policy because the good firm signals to market investors by doing an IPO. In order to separate itself from the bad firm, the good firm can choose an IPO timing that is earlier than the first-best IPO timing. This result is consistent with the empirical evidence that less profitable firms tend to sell out to a large firm rather than going public.

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“…This variable captures to what extent a firm is efficient in converting the capital it invests into net income; a high value indicates that a firm generates more profit with less investment. The method we adopted to identify the matching firm is similar to that of Purnanandam and Swaminathan (2004) and Banerjee et al (2016). Specifically, we match each IPO firm in our sample with an industry peer (at the 3-digit SIC code) based on the comparable sales and EBITDA profit margins,…”

Section: Post-ipo Performancementioning

confidence: 99%

Stay Concentrated to Survive

Gounopoulos,

Huang

2019

SSRN Journal

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Using a text-based measure as proxy for a firm's geographically dispersed business interests, we document that geographic dispersion increases the probability of failure risk for newly listed firms. We find that the effect is more pronounced in a soft information environment where information is not easily transferrable or verifiable over long distances, and in small communities where managerial social concerns dominate in decision-making. Moreover, we find that firms with spatially distributed business interests are negatively associated with post-IPO operating performance. Overall, the results are consistent with the argument that geographically dispersed firms are subject to internal information asymmetry and divert managerial focus away from shareholder value, which negatively affects corporate performance and eventually results in corporate failure. Our study suggests to corporate world, stay concentrated to survive.

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Leaders and followers in hot IPO markets

Cited by 27 publications

References 69 publications

Making Waves: To Innovate or Be a Fast Second?

Making Waves: To Innovate or Be a Fast Second?

Selling out or going public? A real options signaling approach

Stay Concentrated to Survive

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