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The Impact of the Corporate Control Market on IPO Decisions


  • I thank Bonnie Van Ness (Editor), an anonymous reviewer, Marcus Braga-Alves, Lee Dunham, Bill Even, Ning Gao, Beverly Marshall, Terry Nixon, David Pompilio, David Shrider, Scott Smart, Steve Wyatt, Chad Zutter, and seminar participants at the 2010 Financial Management Association and 2010 Midwest Finance Association meetings for helpful comments and suggestions and Lucian Bebchuk, Laura Field, Andrew Metrick, and Jay Ritter for providing data used in this study. Any remaining errors or omissions are the responsibility of the author.

Corresponding author: 3013 Farmer School of Business, Miami University, Oxford, OH 45056-1879; Phone: (513) 529-1563; Fax: (513) 529-8598; E-mail:


Entrepreneurs who take their firm public during an active corporate control market face an increased risk of losing control through a takeover. I examine the extent to which the threat of takeover impacts IPO firms’ decisions and find that an active takeover market in an IPO firm's industry increases the probability that the firm incorporates in a state with state-level antitakeover provisions. IPO firms backed by venture capital investors and reputable underwriters are less likely to incorporate in a state offering antitakeover provisions. A closer examination of equity carve-outs suggests that control is not a first-order consideration for some IPO firms.