Moving from Private to Public Ownership: Selling Out to Public Firms versus Initial Public Offerings


  • We thank Thomas Chemmanur, Jeff Coles, Laura Field, Kathleen Fuller, Radhakrishnan Gopalan, Randy Heron, Tim Jenkinson, Jim Linck, Michelle Lowry, Sandy Klasa, David Mustard, Lance Nail, Debarshi Nandy, Jeff Netter, Bill Petty, Gordon Phillips, Luc Renneboog, Kristian Rydqvist, Sandra Sizer, Jeffrey Zwiebel, and the editor and referee for their many helpful comments. In addition, we appreciate seminar comments at the University of Georgia, Texas Tech University, Texas A&M University, the 2004 Corporate Governance Conference at the University of Texas, the 2004 Financial Management Association Meetings, the 2005 European Finance Association Meetings, the 2005 Amsterdam Center for Law and Economics conference on the Ownership of the Modern Corporation, and the 2006 American Finance Association Meetings.


We study two alternative means to move assets from private to public ownership: through the acquisition of private companies by firms that are public (sellouts) or through initial public share offerings (IPOs). We consider firm-specific characteristics for 1,074 IPO and 735 sellout firms to identify differences in growth, capital constraints, and asymmetric information between the two types of transactions. Our results suggest that firms move to public ownership through an IPO when they have greater growth opportunities and face more capital constraints. We provide a better understanding of the firm-specific characteristics that lead firms to go public.