CentER

Teye Marra

Abstract:
This thesis studies the influence of proprietary disclosure costs related to informing product market competitors on management communication with investors. In doing so it focuses on the firm's decision to go public. A firm that goes public not only experiences a change in its financial and governance structure, it also has to cope with a more demanding disclosure environment. A central theme throughout the thesis is the trade-off between marginal proprietary disclosure costs and other marginal financing costs related to the choice between public or private financing. This choice is analytically explored in this thesis. We find that the influence of competitor-related proprietary costs on the firm's decision to go public is nonmonotonic and that this influence is the highest for firms that compete in moderately competitive industries. This prediction is empirically tested by comparing industrial characteristics of Dutch Firms that executed an Initial Public Offering on the Stock Exchange of the Amsterdam Exchanges between 1984 and 1995 with firms that were in a position to do so. We find evidence indicating that proprietary disclosure cost considerations influence the decision to go public and that the association between competition and going public is nonmonotonic.