The Decision to Go Public : Evidence from Corporate Bond Issuers

Empirical evidence on the decision to go public is sparse, as most private firms do not report their financial results. In this paper, we take advantage of the fact that a number of private firms in the U.S. have public bonds, and are thus required to release a substantial amount of information in SEC filings. Our sample of private firms consists of firms that are typically larger and more leveraged than public firms. Compared with public firms that also have issued bonds, we find they are younger, but still more levered and revealing fewer growth opportunities. Finally, the private firms in our sample that subsequently attempt an IPO are more likely to have already sold equity to outsiders (typical private equity specialists) and thus seem less concerned about giving up control. We also find that size, age, bond ratings, and market to book ratios are important but that measures of growth opportunities are weak factors at best