Discussion

Overview

Class Preparation Materials:

• Required Readings:
  • Chemmanur, T. J., & Fulghieri, P. (1999). Theory of the going-public decision. The Review of Financial Studies, 12(2), 249-279.
  • Chok, J. I., & Sun, Q. (2007). Determinants of idiosyncratic volatility for biotech IPO firms. Financial Management, 36(4), 107-122.
  • Ferreira, D., Manso, G., & Silva, A. (2014). Incentives to innovate and the decision to go public or private. The Review of Financial Studies, 27(5), 1329-1361.
  • Pagano, M., Panetta, F., & Zingales, L. (1998). Why do companies go public? An empirical analysis. The Journal of Finance, 53(1), 27-64.
  • Zingales, L. (1995). Insider ownership and the decision to go public. The Review of Economic Studies, 62(3), 425-448.

Capital Markets, Exits, and Investor Returns

Answer the following questions in at least 100 words each:

1. What are the theoretical determinants of a private firm's decision to go public? How do factors such as information asymmetry and agency costs influence this decision?
2. How do incentives to innovate affect a firm's choice between going public and remaining private? How does the ownership structure (public vs. private) influence the level and type of innovation?
3. What are the determinants of idiosyncratic volatility for biotech IPO firms? How do firm-specific characteristics and market conditions contribute to the volatility of these firms? Why should we care?
4. What are the empirical reasons why companies choose to go public? What factors explain the variation in the propensity of firms to undertake an IPO?
5. How does insider ownership influence a firm's decision to go public? What is the relationship between the level of insider ownership and the timing of the IPO?