Critical Finance Review > Vol 7 > Issue 1

Why Do Firms Go Public Through Debt Instead of Equity?

Denys Glushkov, Acadian Asset Management, USA, dglushkov@acadian-asset.com Ajay Khorana, Citigroup, USA, ajay.khorana@citi.com P. Raghavendra Rau, University of Cambridge, UK, r.rau@jbs.cam.ac.uk Jingxuan Zhang, University of Cambridge, UK, jz428@jbs.cam.ac.uk
 
Suggested Citation
Denys Glushkov, Ajay Khorana, P. Raghavendra Rau and Jingxuan Zhang (2018), "Why Do Firms Go Public Through Debt Instead of Equity?", Critical Finance Review: Vol. 7: No. 1, pp 85-110. http://dx.doi.org/10.1561/104.00000057

Published: 10 Jul 2018
© 2018 Denys Glushkov, Ajay Khorana, P. Raghavendra Rau and Jingxuan Zhang
 
Subjects
 
Keywords
G32
Initial public debt offeringsInformation asymmetryGoing public decisionFinancial statement informativeness
 

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In this article:
1. Introduction
2. Data Sources
3. Characteristics of IPDO Firms
4. Conclusion
Appendix: Sample Creation
References

Abstract

We analyze a sample of private firms that go public through an initial public debt offering (IPDO) as an alternative to going public through equity (initial public offering [IPO]). Firms that choose the IPDO route are larger, more likely to be backed by a financial sponsor such as a venture capital or private equity firm, and less likely to face information asymmetry than traditional IPO firms. Only a quarter of these firms eventually conduct an IPO, but those who do face lower underpricing than their contemporaneous private peers who do not have public debt at the time of going public.

DOI:10.1561/104.00000057