Why Do Companies Choose to Go IPOs? New Results Using Data from Taiwan;

In this study, we examine the determinants of firms’ IPO decisions in Taiwan, for thesample period of 1989 to 2000. The regulations in Taiwan permit us to identify firms thatmet IPO requirements but chose not to go public. The unique regulatory environmentallows a clear comparison of firms that choose IPOs and those that do not. With theexception of Pagano, Panetta and Zingales (1998), we are not aware of any similar study.Their paper examines the IPO market in Italy, and there seem to be considerabledifferences between that market and Taiwan market. Indeed, we find strong evidence thatIPOs are not motivated by financing needs or constraints while they do. Some of ourresults are nevertheless consistent with theirs -- in particular, we find that larger andprofitable firms are more likely to list equity. Our other findings also provide supportfor, though not overwhelmingly, information asymmetry, listing costs, liquidity, owners’diversification desire, and market timing as factors influencing IPO decisions. Finally,we present evidence strongly consistent with venture capital providing certification tofirm credibility.