Acquisition-driven IPOs – Theory and evidence in Central and Eastern Europe

Abstract

Initial public offerings and acquisitions are decisive and unique events in a firm’s life cycle. Motivations of private firms for going public have been broadly examined in recent decades and for a variety of reasons, the firm’s short-term takeover strategy has been observed as an important motive for firms to perform an initial public offering. Extensive empirical research has been conducted lately to verify this statement, mostly relying on US and Western European data. In this paper we analyze the relationship between initial public offerings and acquisitions in Central and Eastern Europe. We find evidence that newly public firms on the Polish stock market have increased acquisition activity while this relation is weaker in the Czech Republic, Hungary and Slovenia. We also identify major characteristics of the regional financial system and stock markets which serve as possible explanations for our results.