Entrepreneurial Learning, the IPO Decision, and the Post-IPO Drop in Firm Profitability / Lubos Pastor, Lucian Taylor, Pietro Veronesi.

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Pastor, Lubos

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w12792.Publication details: Cambridge, Mass. National Bureau of Economic Research 2006.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We develop a model in which an entrepreneur learns about the average profitability of a private firm before deciding whether to take the firm public. In this decision, the entrepreneur trades off diversification benefits of going public against benefits of private control. The model predicts that firm profitability should decline after the IPO, on average, and that this decline should be larger for firms with more volatile profitability and firms with less uncertain average profitability. These predictions are supported empirically in a sample of 7,183 IPOs in the U.S. between 1975 and 2004.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w12792 (Browse shelf(Opens below))	Not For Loan

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December 2006.

We develop a model in which an entrepreneur learns about the average profitability of a private firm before deciding whether to take the firm public. In this decision, the entrepreneur trades off diversification benefits of going public against benefits of private control. The model predicts that firm profitability should decline after the IPO, on average, and that this decline should be larger for firms with more volatile profitability and firms with less uncertain average profitability. These predictions are supported empirically in a sample of 7,183 IPOs in the U.S. between 1975 and 2004.