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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/26533

Title: The choice of outside equity: An exploratory analysis of privately held firms
Authors: Boehmer, Ekkehart
Ljungqvist, Alexander P.
Keywords: Capital structure
capital constraints
private equity
going public decision
Issue Date: Apr-2001
Series/Report no.: FIN-01-004
Abstract: We analyze the choice between public and private equity financing of a unique, hand-collected sample of privately held firms that have indicated their willingness to raise outside equity. We document that these firms are remarkably similar at the time of the announcement, yet 71% complete an IPO, 18% sell equity privately, and the remaining firms do not raise capital at all. To understand what determines the ultimate outcome, we follow these firms over time and record what they might learn up to their final decision. We identify the marginal conditions that favor raising outside equity, and those that determine the choice between public and private equity. Our results show that firms react systematically to changes in market conditions, such as equity returns and the cost of capital, that occur after the announcement, controlling for capital constraints, ownership structure, and the motivation for raising outside capital.
URI: http://hdl.handle.net/2451/26533
Appears in Collections:Finance Working Papers

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