Initial Public Offerings: An Analysis of Theory and Practice

54 Pages Posted: 16 Apr 2004

See all articles by James C. Brau

James C. Brau

Brigham Young University

Stanley E. Fawcett

Weber State University

Date Written: September 2004


We survey 336 CFOs to compare practice to theory in the areas of IPO motivation, timing, underwriter selection, underpricing, signaling, and the decision to remain private. We find the primary motivation for going public is for acquisition purposes. CFOs base IPO timing on overall market conditions, are well-informed regarding expected underpricing, and feel underpricing compensates investors for taking risk. The most important positive signal is past historical earnings, followed by underwriter certification. CFOs have divergent opinions about the IPO process depending on firm-specific characteristics. Finally, we find the main reason for remaining private is to preserve decision-making control and ownership.

Keywords: Initial public offer, IPO, managerial attitude, survey methodoloy

JEL Classification: G32, G24

Suggested Citation

Brau, James C. and Fawcett, Stanley E., Initial Public Offerings: An Analysis of Theory and Practice (September 2004). Available at SSRN: or

James C. Brau (Contact Author)

Brigham Young University ( email )

TNRB 640
Marriott School
Provo, UT 84602
United States
801-318-7919 (Phone)
801-422-0108 (Fax)


Stanley E. Fawcett

Weber State University ( email )

3801 University Circle
Ogden, UT 84408
United States

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