Initial Public Offerings: A Synthesis of the Literature and Directions for Future Research

Transitioning from private to public status is a watershed event in the life of any firm. For most firms and managers, the process of conducting an Initial Public Offering (IPO) is something they will only go through once. As such, there exists much uncertainty over the process, starting with the decision of whether to go public and including issues such as when to go public, who to select as advisors, how to price the offering and how to structure the governance of the newly public firm. A broad set of academic literature has studied all these issues, and the purpose of Initial Public Offerings is to review the existing evidence and suggest areas where our understanding is less complete and would benefit from further research. Section 1 reviews the reasons that firms go public. Having established firms' basic motivations for public listing, Section 2 provides an empirical overview of the key aspects of the IPO process. Section 3 provides a detailed discussion of the institutional details surrounding the IPO process, which are crucial to understanding this market. Section 4 reviews the rich literature on the pricing of IPOs, and the role of the underwriter in the process. Section 5 discusses the role of intermediaries throughout the IPO process. Sections 6 and 7 review the literature and evidence on post-IPO returns and cycles in the IPO market, respectively. Finally, Section 8 discusses the burgeoning literature on the governance of newly public firms and Section 9 concludes.