A Comparative Study on the Determinants of the Back－door Listing and IPO in KOSDAQ Market
Asian Tax Journal Vol. 10 No. 3 (2009), pp. 81-103
Abstract
This paper analyses the determinants of back－door listing in the KOSDAQ market by comparing the characteristics of back－door listing with those of initial public offerings(IPOs). The sample contains 458 new listings and 33 firms that carried out back－door listings even though they met the listing requirements. I estimated a logistic regression model of the probability of back－door listing by comparing newly listed firms with back－door listing firms that satisfy the official requirements for listing. The result shows that the size of a company and the leverage have a positive impact on the likelihood of a back－door listing. On the other hand, the firm's age and profitability have a negative significance on the decision to carry out back－door listing. In the presence of adverse selection, the probability of back－door listing should be negatively correlated with the age and/or the size of a company because of its track record. However, The findings indicate that the size of a company has a positive impact on the likelihood of a back－door listing. The findings also indicate that the leverage is a deterrent from going public due to close scrutiny by the authorities and positively correlated with a back－door listing. The probability of a back－door listing is negatively affected by the profitability because going public of firms with high profitability provides a benefit of financing large amount through public offering. This Study assessed characteristics of each method by comparatively analyzing backdoor listing and IPO. Both of two methods of listing on stock exchange, that is, IPO and backdoor listing, have double－edge of imparting positive or negative effect on the market, and companies select either of the methods in accordance with the companies' own characteristics.
Keywords
- back－door listing
- initial public offering
- KOSDAQ