Corporate control, expected underpricing, and the choice of issuance mechanism in unseasoned equity markets

Using unique Australian data we examine the choice of issuance mechanism for unseasoned equity (between initial public offers and direct placements) prior to exchange listing. Controlling for liquidity in the decision to go public and incorporating interrelated decisions, we find that corporate control concerns and expected underpricing differences between initial public offers and direct placements play an important role. Also the probability of an initial public offer (direct placement) decreases (increases) with information asymmetry and the reputation of the issuer. Further, the choice of issuance mechanism and the underpricing, issue size and ownership retention decisions are interrelated.