why do firms go public? - Marriott School

Table 1. Survey of 984 IPO CFOs from 1996-1998 and 2000-2002
Strongly
agree or
agree/Yes
Strongly
or mildly
disagree/
No
Panel A. General Life-Cycle Theory
A benefit of the IPO was that it allowed our company to gain additional financing for
immediate growth. 82.60% 7.90%
A benefit of the IPO was that it allowed our company to gain additional financing for
long-term growth. 86.80% 4.20%
Yes, No, or Don't Know
Smaller companies are less likely to go public. 55.80% 32.40%
Younger companies are less likely to go public. 49.50% 37.60%
High-tech companies are less likely to go public. 1.90% 86.60%
Riskier companies are more likely to go public.
11.50% 59.80%
Panel B. Capital Structure / Cost of Capital
A benefit of the IPO was to decrease the total cost of capital. 38.20% 34.40%
Yes, No, or Don't Know
We plan to issue more debt within two years. 33.70% 38.80%
Our present debt/equity mix is optimal.
49.50% 43.30%
Panel C. Pecking Order
A benefit of the IPO was that it allowed our company to reduce its debt. 44.40% 37.70%
A benefit of the IPO was to reduce open bank loans. 37.40% 43.30%
Yes, No, or Don't Know
Highly leveraged companies are more likely to go public. 47.90% 21.50%
Companies with higher interest rates are more likely to go public. 37.30% 27.50%
Panel D. Change Control
A benefit of the IPO was that it allowed our company increase options to 22.20% 46.70%
change control of company.
Panel E. VC Harvest
A benefit of the IPO was that it allowed the venture capitalist to sell their interest and
move on. 16.30% 65.30%
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