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Where Have All the IPOs Gone?

Part of: JFQA William F. Sharpe Best Paper Award Winner

Published online by Cambridge University Press:  17 January 2014

Xiaohui Gao ,
Jay R. Ritter  and
Zhongyan Zhu
Xiaohui Gao
Affiliation:
xiaohui@rhsmith.umd.edu, Smith School of Business, University of Maryland, 4426 Van Munching Hall, College Park, MD 20742 and University of Hong Kong;
Jay R. Ritter
Affiliation:
jay.ritter@warrington.ufl.edu, Warrington College of Business Administration, University of Florida, PO Box 117168, Gainesville, FL 32611;
Zhongyan Zhu
Affiliation:
zhongyan@cuhk.edu.hk, Business School, Chinese University of Hong Kong, No 12, Chak Cheung St, Shatin NT, Hong Kong.
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Abstract

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During 1980–2000, an average of 310 companies per year went public in the United States. Since 2000, the average has been only 99 initial public offerings (IPOs) per year, with the drop especially precipitous among small firms. Many have blamed the Sarbanes-Oxley Act of 2002 and the 2003 Global Settlement’s effects on analyst coverage for the decline in IPO activity. We find very little support for the conventional wisdom, and we offer an alternative explanation. Our economies of scope hypothesis posits that the advantages of selling out to a larger organization, which can speed a product to market and realize economies of scope, have increased relative to the benefits of operating as an independent firm.

Information

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 48 , Issue 6 , December 2013 , pp. 1663 - 1692
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2013 

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