The dynamic impact of macroeconomic factors on initial public offerings: evidence from time-series analysis

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Abstract:

This article examines the explanatory power and the dynamic impact of macroeconomic conditions on Initial Public Offering (IPO) activities in US during the period from 1970 to 2005. Applying time-series econometric techniques, we find the existence of long-run equilibrium relationships between IPO activities and selected macroeconomic variables. Stock market performance and volatility are shown to play the most important role in the timing of IPOs. The Fed funds rate and the 10 year US Treasury Bond (TB) yield play a comparable role in determining the amount of proceeds raised in the IPOs. There also exist different short-run dynamic adjustment mechanisms between IPOs and macroeconomic factors towards the long run equilibrium path and they are mostly completed within the period of 6 months to 1 year. The results have some useful implications for forecasting IPO activities.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840903493267

Affiliations: 1: Faculty of Finance, Cass Business School,City University London, 106 Bunhill RowLondonEC1Y 8TZ, UK 2: Department of Economics and International Business,Drexel University, PhiladelphiaPA 19104, USA

Publication date: September 1, 2011

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