Abstract

Some research regard launching an IPO as an opportunity to maximize financial return from selling the firm (Loughran, Ritter & Rydqvist, 1994; Pagano, Panetta & Zingales; 1998). If an IPO is the selling of a firm, then such decision to launch an IPO would likely be driven by the amount of risk inherent in the market, as maximization of financial return is driven by the positive relationship between expected return and risk (Markowitz, 1958; Tobin, 1958). On the contrary, recent research suggest that going public may be regarded as an investment in future growth opportunities (Bancel & Mitoo, 2001; Draho, 2004). If an IPO is an investment in future growth opportunities, then such decision to launch an IPO would likely be driven by the amount of uncertainty in the market, as growth opportunities are driven by the uncertainty that exists in the market. Such notion raises the question whether launching an IPO a non-entrepreneurial decision driven by market risk, and an entrepreneurial decision driven by market uncertainty.

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