Doctoral thesis: Firms' financial volatility affect acquisition activity and timing of IPO's

Magnus Blomkvist's doctoral thesis "Essays on market states, firm growth and corporate finance decisions" highlights the impact different market states have on corporate financing and firm growth on the US market from 1970 until 2013. As a consequence of the recent financial crisis, firm financing dried up and therefore corporate investments and M&A (mergers and acquisitions) activity plummeted. The thesis, consisting of three different essays, looks at how market-wide supply of debt and equity capital affects firm financing and investment activities.

Blomkvist's first essay studies which type of firms that are more likely to be the drivers of merger waves.

"The results indicate that financially constrained firms tend to have more volatile acquisition activity and that these firms are more sensitive to changes in credit supply" explains Blomkvist.

The second essay studies the time variation in firms' aim to stage their equity financing. The results show that firms going public during times of low market valuations tend to raise less capital in the IPO (initial public offering) and issue more equity following the IPO. On the other hand, firms that go public during hot markets tend to raise a larger amount during the IPO and not stage their financing. The result is attributed to behavioural biases and that only very robust firms are able to go public during cold markets and thereby were able to choose the amount to be raised in the IPO. Meanwhile, firms that list during hot market conditions, tend to raise more capital than needed.

The third essay deals with the reason why firms go public during cold issue markets.

"One of the most plausible reasons for firms to go public during cold issue markets is to use the proceeds to conduct acquisitions" Magnus Blomkvist concludes.

M.Sc. Magnus Blomkvist defends his doctoral thesis in Finance "Essays on market states, firm growth and corporate finance decisions" on Friday 10 October.

Time: 10 October 2014, at 12
Place: Hanken School of Economics, Helsinki
Opponent: Professor Sami Torstila, Aalto University Business School
Custos: Professor Timo Korkeamäki, Hanken School of Economics

For more information, please contact:
Magnus Blomkvist
mblomkvist@audencia.com alt. magnus.blomkvist@hanken.fi
+358400790502

A copy of the thesis can be downloaded at: http://hdl.handle.net/10138/135988