Critical Finance Review > Vol 7 > Issue 1

Capital Structure Changes Around IPOs

Evan Dudley, Smith School of Business, Queen’s University, Canada, evan.dudley@queensu.ca Christopher James, Warrington College of Business, University of Florida, USA, christopher.james@warrington.ufl.edu
 
Suggested Citation
Evan Dudley and Christopher James (2018), "Capital Structure Changes Around IPOs", Critical Finance Review: Vol. 7: No. 1, pp 55-79. http://dx.doi.org/10.1561/104.00000045

Published: 10 Jul 2018
© 2018 Evan Dudley and Christopher James
 
Subjects
 
Keywords
G32
Capital structurePreferred sharesMarket timingStaged financeInitial public offerings
 

Article Help

Share

Download article
In this article:
1. Introduction
2. Background: Use of Preferred Stock by Start-Up and Public Companies
3. Data
4. Leverage Changes Around IPOs
5. Hot-Issue Markets and Leverage Changes Around the IPO
6. Conclusion
Data Appendix: Sample Construction
References

Abstract

This paper investigates capital structure changes around initial public offerings (IPOs). We show that the magnitude and persistence of leverage reductions among IPO firms are sensitive to sample selection, the time period studied and how preferred shares are treated in computing pre-IPO leverage. Using a broader sample of IPOs and treating preferred stock as equity, we find little evidence of transitory market timing effects on leverage in hot-issue markets.

DOI:10.1561/104.00000045