Blackwell Reference Online

Extract

Initial public offerings (IPOs) transition privately held new ventures into the arena of public trading. Firms have undertaken IPOs in over thirty countries, but the majority of IPO research involves firms in the United States (for a review of IPO research in international settings, see Ritter, 1998 ). In the US, privately held firms are typically owned by a small number of investors ( see entrepreneur ; business angel network ; venture capital ) and are not required to file financial statements with the Securities and Exchange Commission (SEC). While IPOs are usually associated with new ventures, it is important to note that they also apply to spin‐offs ( see spin‐offs ), reverse leveraged buyouts, and closed‐end mutual funds. The majority of IPO researchers, however, typically exclude such IPOs from analysis. Research indicates that entrepreneurs serve as CEO for approximately 50 percent of IPO firms, with the remainder led by “professional” managers ( Certo et al., 2001 ). Undertaking an IPO (also known as “going public”) transitions the private firm into a publicly traded company. With this new status of being publicly traded, shares of the IPO firm's stock are listed on a stock exchange (e.g., New York Stock Exchange) and investors are able to buy and sell shares of the company's stock through stockbrokers. In addition, the SEC requires publicly traded companies to abide ... log in or subscribe to read full text