Why Do Companies Go Public? An Empirical Analysis


  • Marco Pagano,

    1. Università di Salerno and CEPR
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  • Fabio Panetta,

    1. Banca d'Italia
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  • Luigi Zingales

    1. University of Chicago, NBER, and CEPR
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    • Pagano is with the Università di Salerno and CEPR, Panetta is with Banca d'Italia, and Zingales is with the University of Chicago, NBER, and CEPR. This paper is part of the research project on “The decision to go public and the stock market as a source of capital,” promoted by the Ente “Luigi Einaudi” per gli studi monetari bancari e finanziari. The suggestions we received from Espen Eckbo, Tullio Jappelli Mario Massari, Wayne Mikkelson, Marco Ratti, Jay Ritter, Andrei Shleifer, Jeremy Stein, Sheridan Titman, Guglielmo Weber, Oved Yosha, an anonymous referee, René Stulz (the editor), and particularly Steve Kaplan were very helpful. We also benefited from the comments of participants at the final conference of the research project in Rome, at the Nobel Symposium on Law and Finance, at the European Finance Association meetings in Milan, at the American Finance Association meetings in San Francisco, at the Maryland Finance Conference, at the Utah Winter Finance Conference, at the Journal of Financial Intermediation Conference in Amsterdam, and at seminars at the Milan Stock Exchange Council, the Italian Antitrust Authority, Columbia University, University of Florida, and University of Venice. Fulvio Coltorti and Luca Filippa kindly supplied data and crucial information, and Stefania De Mitri and Paolo Filippo Volpin provided truly outstanding research assistance. Pagano also acknowledges financial support from the Consiglio Nazionale delle Ricerche, and Zingales from the Center for Research on Security Prices at the University of Chicago and NSF grant #SBR-9423645.


Using a large database of private firms in Italy, we analyze the determinants of initial public offerings (IPOs) by comparing the ex ante and ex post characteristics of IPOs with those of private firms. The likelihood of an IPO is increasing in the company's size and the industry's market-to-book ratio. Companies appear to go public not to finance future investments and growth, but to rebalance their accounts after high investment and growth. IPOs are also followed by lower cost of credit and increased turnover in control.