Access to Capital and the IPO Decision: An Analysis of US Private Firms

Almazan, Andres; Swem, Nathan; Titman, Sheridan; Weitzner, Gregory

doi:10.17016/FEDS.2025.102

Working Paper

Access to Capital and the IPO Decision: An Analysis of US Private Firms

Abstract: We analyze firms' IPO decisions using detailed financial data on US private firms. We find that firms with higher external capital needs are more likely to go public. Following the IPO, firms increase their investment and debt issuance, resulting in leverage ratios close to their pre-IPO levels. Finally, newly public firms borrow from an expanded pool of lenders at improved terms, with a decrease in the within-firm dispersion in banks' private risk assessments. Our evidence is consistent with firms going public to improve their access to capital, which is facilitated by a reduction in asymmetric information.

JEL Classification: G14; G32;

https://doi.org/10.17016/FEDS.2025.102