I interested a private firm’s choice of growth strategy between IPOs and acquisitions. Both pathways provided the private firms a gaining increased access to public capital, increasing their liquidity, and/or changing the control of their firms, however, it has been still inconclusive to decide which method would be the most appropriate for every private firms. Using samples of over 49,000 US private firms, I examined the driving factors which were sensitivity to market and soft information. First, sensitivity to market relates to systematic risk which high degree of risk can lead private firms not to go alone. Second, soft information is asset that is harder to communicate to outsiders. Our results showed that sensitivity to market does not play the main role in driving the choice of private firms in general. In contrast, soft information is main factors impacted on the firms’ decision. The high level of soft information in private firms relative is positively related to the probability that a firm will be a part of bigger firm. Finally, I compared IPO versus restricted sub-sample of acquisition related to payment method and post-acquisition control for comparability enhancement. The results showed the more benefits and interests the owner of being acquired firms have, the more points they would consider for the choice of firms.
Sensitivity to market, soft information and moving from private to public ownership: Evidence from U.S.
Post by MSF Chula at Sunday, 10 January 2021 05:40 PM
Last updated at Sunday, 10 January 2021 05:40 PM