The going public decision of business group firms

Borja Larrain; Giorgo Sertsios; I. Francisco Urzúa

doi:10.1016/j.jcorpfin.2020.101819

The going public decision of business group firms

Borja Larrain, Giorgo Sertsios^*, I. Francisco Urzúa

^*Corresponding author for this work

Facultad de Ciencias Económicas y Empresariales

Research output: Contribution to journal › Article › peer-review

Abstract

IPOs affiliated to business groups represent a large fraction of new issues in global markets. Groups are characterized by stronger private benefits of control and an internal funding advantage. Consistent with these features, group firms are more selective when going public than standalone firms. In particular, group IPOs are larger and older firms and engage less in market timing than standalone IPOs. Group firms invest less and are more profitable post IPO. Private benefits of control also affect the within-group selection of IPO firm. Our findings illustrate novel selection effects in public markets due to pre-IPO control structures.

Original language	English
Article number	101819
Journal	Journal of Corporate Finance
Volume	66
DOIs	https://doi.org/10.1016/j.jcorpfin.2020.101819
State	Published - 1 Feb 2021

Bibliographical note

Funding Information:
We would like to thank comments and suggestions from two anonymous referees, Douglas Cumming, Alexander Ferko, Jean Helwege, Roni Michaely, Juan Sotes, Jaime Zender, conference participants at the 2019 Midwest Finance Association meetings and the 2019 FMA Latin America meetings, and seminar participants at IESE, NHH Norwegian School of Economics, Stanford GSB, Universidad Adolfo Iba?ez, UC Riverside, the University of Colorado, and the University of Houston. We also thank Augusto Orellana for excellent research assistance. Larrain acknowledges funding from Proyecto Fondecyt Regular #1180593. Sertsios acknowledges funding from Proyecto Fondecyt Regular #1190091.

Funding Information:
We would like to thank comments and suggestions from two anonymous referees, Douglas Cumming, Alexander Ferko, Jean Helwege, Roni Michaely, Juan Sotes, Jaime Zender, conference participants at the 2019 Midwest Finance Association meetings and the 2019 FMA Latin America meetings, and seminar participants at IESE, NHH Norwegian School of Economics, Stanford GSB, Universidad Adolfo Ibañez, UC Riverside, the University of Colorado, and the University of Houston. We also thank Augusto Orellana for excellent research assistance. Larrain acknowledges funding from Proyecto Fondecyt Regular #1180593 . Sertsios acknowledges funding from Proyecto Fondecyt Regular #1190091 .

Publisher Copyright:
© 2020 Elsevier B.V.

Keywords

Business groups
IPOs
Private benefits

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10.1016/j.jcorpfin.2020.101819

Cite this

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title = "The going public decision of business group firms",

abstract = "IPOs affiliated to business groups represent a large fraction of new issues in global markets. Groups are characterized by stronger private benefits of control and an internal funding advantage. Consistent with these features, group firms are more selective when going public than standalone firms. In particular, group IPOs are larger and older firms and engage less in market timing than standalone IPOs. Group firms invest less and are more profitable post IPO. Private benefits of control also affect the within-group selection of IPO firm. Our findings illustrate novel selection effects in public markets due to pre-IPO control structures.",

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author = "Borja Larrain and Giorgo Sertsios and {Francisco Urz{\'u}a}, I.",

note = "Funding Information: We would like to thank comments and suggestions from two anonymous referees, Douglas Cumming, Alexander Ferko, Jean Helwege, Roni Michaely, Juan Sotes, Jaime Zender, conference participants at the 2019 Midwest Finance Association meetings and the 2019 FMA Latin America meetings, and seminar participants at IESE, NHH Norwegian School of Economics, Stanford GSB, Universidad Adolfo Iba?ez, UC Riverside, the University of Colorado, and the University of Houston. We also thank Augusto Orellana for excellent research assistance. Larrain acknowledges funding from Proyecto Fondecyt Regular #1180593. Sertsios acknowledges funding from Proyecto Fondecyt Regular #1190091. Funding Information: We would like to thank comments and suggestions from two anonymous referees, Douglas Cumming, Alexander Ferko, Jean Helwege, Roni Michaely, Juan Sotes, Jaime Zender, conference participants at the 2019 Midwest Finance Association meetings and the 2019 FMA Latin America meetings, and seminar participants at IESE, NHH Norwegian School of Economics, Stanford GSB, Universidad Adolfo Iba{\~n}ez, UC Riverside, the University of Colorado, and the University of Houston. We also thank Augusto Orellana for excellent research assistance. Larrain acknowledges funding from Proyecto Fondecyt Regular #1180593 . Sertsios acknowledges funding from Proyecto Fondecyt Regular #1190091 . Publisher Copyright: {\textcopyright} 2020 Elsevier B.V.",

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The going public decision of business group firms

Abstract

Bibliographical note

Keywords

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