This study comprises an investigation of the timing of initial public offerings (IPOs) and
the role therein, of investment banks, in taking firms public. Most prior studies of IPOs
and seasoned equity offerings (SEOs) investigate timing with respect to firm-specific or
economy-wide conditions. Also, the vast majority of prior studies have apparently
ignored the role of market timing often ascribed to underwriters by practitioners. The
analysis in this study elucidates the matter of the long-run post-issue performance of IPOs
documented in the literature. Evidence is provided here about the timing of IPO firms
relative to market conditions before and after their offerings. It is shown that firms are,
on average, more likely to go public when the market valuation of comparable stocks in
the same industry is at its peak relative to the entire market. No evidence is found of a
pattern of IPO firms timing their offerings with respect to market-wide conditions.
Further, this study shows that IPO timing is a function of the reputation of investment
banks who have expertise in the financial market. It is found that the more reputable
investment banks possess a greater proficiency than their lesser known counterparts, in
taking companies public when the market valuation of comparable stocks in the same
industry is high. These results are found to be invariant with regard to several statistical
tests and alternative explanations.
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