Abstract

The initial public offering (IPO) process is important for entrepreneurial ventures in reducing information asymmetry between insiders and interested parties outside the firm. Signaling theory in the IPO context has typically argued that firms communicate the future direction of the venture and the value of the firm through its actions. The dual tracking literature has argued that signals impact the likelihood of future acquisition following the IPO. Dual tracking is where a firm pursues an IPO with a longer-term interest in being acquired. Our research question is “Do internal signals provide effective communication over and above external signals for dual tracking firms?” While research on dual tracking has focused on external signals, our research examines takeover defenses as internal signals and argues that their presence pre-IPO is a signal of firm value.

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