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 the sample period of 1989 to 2000. The regulations in Taiwan permit us to identify firms that met IPO requirements but chose not to go public. The unique regulatory environment allows a clear comparison of firms that choose IPOs and those that do not. With the exception 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 considerable differences between that market and Taiwan market. Indeed, we find strong evidence that IPOs are not motivated by financing needs or constraints while they do. Some of our results are nevertheless consistent with theirs -- in particular, we find that larger and profitable firms are more likely to list equity. Our other findings also provide support for, 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 to firm credibility.