The stock market as a source of capital: Some lessons from initial public offerings in Italy

This paper complements the analysis of the decision to go public contained in Pagano et al, (1995), We compare a larger set of Italian initial public offerings, including holding companies, with size-matched private companies, Even in this larger sample we find evidence that: (i) the new equity capital raised upon listing is not used to finance subsequent investment and growth; (ii) going public reduces the cost of credit; (iii) it is often associated with equity sales by controlling shareholders, and is followed by a higher turnover of control than for other companies. A novel finding is that the funds raised are used to purchase stakes in other companies and other financial assets.