Three essays on going public strategy: Evidence from the banking industry

This dissertation consists of three distinct essays but on a common theme of “going public strategy” by private institutions in the banking industry. The papers are motivated from the observation that banks in the U.S. play dominating roles in the economy and during the last two decades a large number of depository industry converted from private to public status. However there is hardly any study or evidence that traces the experience, understanding, and economic underpinnings associated with the initial public offering processes of these institutions. Importantly, during the last two decades the overall industry experienced tremendous changes in ownership structure, consolidation, and market competition and this dissertation investigates and compares bank strategies in choosing alternative exit strategies in entering the public capital markets.; The first essay investigates the relative importance of different factors influencing banks' decision on going public over consolidating with other banking organizations via mergers and acquisitions. Many banks experienced consolidation through M&A, while some others decided to go public and compete for alternative financing in the capital market. The study highlights the role of economic environment, regulation, market competitive environment, industry practice, and firm fundamentals as the potential determinants for banks in choosing initial public offering strategy over mergers and acquisitions. The second essay examines the relative importance of organizational form, structure, status, and regulation affecting initial public offerings' offer price as well as their under-pricing in the capital market. The third essay analyzes the dividend policy of banks as they become public institutions through the initial public offering process. Dividend announcements have been viewed as a way of signaling manager's private information to shareholders. The question is whether all firms can employ dividend changes in the same manner, or whether the magnitude of the impact depends on the maturity of the firm. Most of the empirical research has focused on dividend policy of established firms instead of newly public firms. In this essay we trace the short- and long-term valuation effects of dividend policy for the newly public banking institutions.