Journal of Business Finance and Accounting, vol.33(1&2), pp.306-328, 2006.

The Strategy of Going Public: How UK Firms Choose Their Listing Contracts

Marc Goergen

Sheffield University Management School (SUMS) and European Corporate Governance Institute (ECGI)

Arif Khurshed

Manchester Business School, University of Manchester

Ram Mudambi

Fox School of Business & Management, Temple University

Abstract

UK firms going public have a choice between public offers and placings. This choice has important implications in terms of who bears the risk of the issue failing and its costs. We find that firms with higher ex ante uncertainty choose a placing contract. Firms whose quality has been certified by a highly reputable sponsor or via creditor screening are more likely to choose a public offer. Large and multinational firms usually choose a public offer whereas there is some evidence that very small issues choose a placing. Finally, the ‘hotness’ of IPO market increases the probability of placings.

Keywords: IPOs, Listing contracts, Placings, Public Offers, Sponsors, Certification, Signaling

JEL Classification: F23, G10, and G30.

Contact:

Ram Mudambi

Institute of Global Management Studies

Fox School of Business & Management

Speakman Hall (006-00)

Temple University

Philadelphia PA 19122, USA

Tel: 1-215-204-2099

FAX: 1-215-204-8029

Email: ram.mudambi@temple.edu