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Use of Proceeds in Private Equity-Backed Initial Public Offerings

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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Use of Proceeds in Private Equity-Backed Initial Public Offerings. / Hammer, Benjamin; Marcotty-Dehm, Nikolaus; Martin, Jens.
In: British Accounting Review, 23.04.2025.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Hammer, B, Marcotty-Dehm, N & Martin, J 2025, 'Use of Proceeds in Private Equity-Backed Initial Public Offerings', British Accounting Review. https://doi.org/10.1016/j.bar.2025.101672

APA

Hammer, B., Marcotty-Dehm, N., & Martin, J. (in press). Use of Proceeds in Private Equity-Backed Initial Public Offerings. British Accounting Review, Article 101672. https://doi.org/10.1016/j.bar.2025.101672

Vancouver

Hammer B, Marcotty-Dehm N, Martin J. Use of Proceeds in Private Equity-Backed Initial Public Offerings. British Accounting Review. 2025 Apr 23;101672. doi: 10.1016/j.bar.2025.101672

Author

Hammer, Benjamin ; Marcotty-Dehm, Nikolaus ; Martin, Jens. / Use of Proceeds in Private Equity-Backed Initial Public Offerings. In: British Accounting Review. 2025.

Bibtex

@article{4f2b26cf0bb6449aa911fe7979a2d3ff,
title = "Use of Proceeds in Private Equity-Backed Initial Public Offerings",
abstract = "This paper examines differences in the disclosure and efficacy of intended use of proceeds between private equity (PE)-backed and non-PE-backed initial public offerings (IPOs). We find that PE-backed issuers have a significantly higher (lower) probability of disclosing “repayment of debt” and “repayment to selling shareholders” (“M&A”) than non-PE-backed issuers. Moreover, PE-backed issuers that disclose “repayment of debt” deleverage significantly more post-IPO to reduce their above-average debt-to-asset ratios to the level of non-PE-backed issuers. This is consistent with the idea that leveraged buyouts do not lead to a sustained change in optimal capital structure. While non-PE-backed issuers that disclose “R&D” (“M&A”) increase their R&D intensity (M&A deal volume) post-IPO, PE-backed issuers do not. Our results suggest that this is due to a trade-off with the need to repay claimholders in PE-backed IPOs. Finally, we show that PE backing reduces underpricing only if the use-of-proceeds disclosure is vague. Hence, we provide evidence that the well-documented PE “certification effect” depends on the information content of the prospectus.",
author = "Benjamin Hammer and Nikolaus Marcotty-Dehm and Jens Martin",
year = "2025",
month = apr,
day = "23",
doi = "10.1016/j.bar.2025.101672",
language = "English",
journal = "British Accounting Review",
issn = "0890-8389",
publisher = "Academic Press Inc.",

}

RIS

TY - JOUR

T1 - Use of Proceeds in Private Equity-Backed Initial Public Offerings

AU - Hammer, Benjamin

AU - Marcotty-Dehm, Nikolaus

AU - Martin, Jens

PY - 2025/4/23

Y1 - 2025/4/23

N2 - This paper examines differences in the disclosure and efficacy of intended use of proceeds between private equity (PE)-backed and non-PE-backed initial public offerings (IPOs). We find that PE-backed issuers have a significantly higher (lower) probability of disclosing “repayment of debt” and “repayment to selling shareholders” (“M&A”) than non-PE-backed issuers. Moreover, PE-backed issuers that disclose “repayment of debt” deleverage significantly more post-IPO to reduce their above-average debt-to-asset ratios to the level of non-PE-backed issuers. This is consistent with the idea that leveraged buyouts do not lead to a sustained change in optimal capital structure. While non-PE-backed issuers that disclose “R&D” (“M&A”) increase their R&D intensity (M&A deal volume) post-IPO, PE-backed issuers do not. Our results suggest that this is due to a trade-off with the need to repay claimholders in PE-backed IPOs. Finally, we show that PE backing reduces underpricing only if the use-of-proceeds disclosure is vague. Hence, we provide evidence that the well-documented PE “certification effect” depends on the information content of the prospectus.

AB - This paper examines differences in the disclosure and efficacy of intended use of proceeds between private equity (PE)-backed and non-PE-backed initial public offerings (IPOs). We find that PE-backed issuers have a significantly higher (lower) probability of disclosing “repayment of debt” and “repayment to selling shareholders” (“M&A”) than non-PE-backed issuers. Moreover, PE-backed issuers that disclose “repayment of debt” deleverage significantly more post-IPO to reduce their above-average debt-to-asset ratios to the level of non-PE-backed issuers. This is consistent with the idea that leveraged buyouts do not lead to a sustained change in optimal capital structure. While non-PE-backed issuers that disclose “R&D” (“M&A”) increase their R&D intensity (M&A deal volume) post-IPO, PE-backed issuers do not. Our results suggest that this is due to a trade-off with the need to repay claimholders in PE-backed IPOs. Finally, we show that PE backing reduces underpricing only if the use-of-proceeds disclosure is vague. Hence, we provide evidence that the well-documented PE “certification effect” depends on the information content of the prospectus.

U2 - 10.1016/j.bar.2025.101672

DO - 10.1016/j.bar.2025.101672

M3 - Journal article

JO - British Accounting Review

JF - British Accounting Review

SN - 0890-8389

M1 - 101672

ER -