IPO Timing Determinants

Abstract

Despite the extensive amount of IPO literature, many unknowns still exists about the inner workings of the IPO process. This paper seeks to extend upon the literature to first confirm whether the IPO market is an appropriate economic indicator. We enhance the approach taken by previous studies with the addition of excess reserves as a macroeconomic proxy to capture trends unique to the most recent recession. Our findings provide support for capital demand, investor sentiment and stock market condition as determinants of IPO fluctuations. The results also suggest that the uncertainty surrounding the latest financial crisis has caused the average amount of IPO proceeds to decrease. Secondly, the paper employs cross sectional data to examine the transition from private to public company at the firm specific level. The size of an offering seems to be dependent upon macroeconomic conditions as well as firm specific characteristics. However, we were unable to find statistically significant differences between firms who go public during a recession and those who wait for markets to improve.