TY  - JOUR
AU  - Pastor,Lubos
AU  - Taylor,Lucian
AU  - Veronesi,Pietro
TI  - Entrepreneurial Learning, the IPO Decision, and the Post-IPO Drop in Firm Profitability
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12792
PY  - 2006
Y2  - December 2006
UR  - http://www.nber.org/papers/w12792
L1  - http://www.nber.org/papers/w12792.pdf
N1  - Author contact info:
Lubos Pastor
University of Chicago
Booth School of Business
5807 South Woodlawn Ave
Chicago, IL  60637
Tel: 773/834-4080
Fax: NA
E-Mail: lubos.pastor@chicagobooth.edu

Lucian A. Taylor
E-Mail: ltaylor1@ChicagoBooth.edu

Pietro Veronesi
University of Chicago
Booth School of Business
5807 South Woodlawn Avenue
Chicago, IL  60637
Tel: 773/702-6348
Fax: 773/702-0458
E-Mail: pietro.veronesi@chicagobooth.edu
AB  - We develop a model in which an entrepreneur learns about the average profitability of a private firm before deciding whether to take the firm public. In this decision, the entrepreneur trades off diversification benefits of going public against benefits of private control. The model predicts that firm profitability should decline after the IPO, on average, and that this decline should be larger for firms with more volatile profitability and firms with less uncertain average profitability. These predictions are supported empirically in a sample of 7,183 IPOs in the U.S. between 1975 and 2004.
ER  -