Firm Mortality and Natal Financial Care
Hong Kong University of Science & Technology - HKUST School of Business and Management
University of Cincinnati
Indiana University - Kelley School of Business - Department of Finance; China Academy of Financial Research (CAFR)
December 24, 2012
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
We construct a mortality table for U.S. public companies during 1985–2006. We find that firms’ age-specific mortality rates initially increase, peaking at age three, and then decrease with age, implying that the first three years of public life are critical. Financial intermediaries involved around the public birth of a firm — venture capitalists (VCs) and high-quality underwriters — are associated with lower firm mortality rates, sometimes for up to seven years after the IPO. VCs reduce mortality rates more through natal financial care than through selection, whereas high-quality underwriters affect firm mortality more through selection.
Number of Pages in PDF File: 91
Keywords: firm mortality, survival risk, initial public offerings, underwriters, venture capital
JEL Classification: D21, D53, E32, G24, G33
Date posted: July 28, 2010 ; Last revised: May 12, 2014
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