Macroeconomic Factors and Initial Public Offerings in Brazil

Abstract

The strategy of going public plays a relevant role in business growth. Macroeconomic conditions are decisive for initial public offerings (IPOs). In this study, we analyzed the impact of macroeconomic factors on IPOs in the Brazilian stock market, considering the period from 2007 to 2018. We used autoregressive distributed lag (ARDL) models to analyze the existence of cointegration between the variables and the long-run effects. The estimated models considered the effects on the proceeds or the number of IPO, which can be related to interest rates, stock market returns, economic activity, and economic uncertainty. Our results indicate that economic activity and uncertainty have long-run effects on both the proceeds and the number of IPOs. There is also evidence that the interest rate has a long-run relationship with the IPO proceeds. In addition, we tested the causal relationships between macroeconomic factors and the IPO variables. For this purpose, we adopted a Granger causality test. We highlight that uncertainty precedes the IPO proceeds. Expectations about macroeconomic conditions are relevant for the decision to go public. Our evidence can provide guidance for stakeholders and policymakers.