IPOs and Employment

Abstract:     
This paper studies the relation between the going public decision and employment growth experienced by IPO firms. We find that a typical IPO firm in our sample hires twice more employees around its IPO than during its life as a private firm. The number of employees increases at an average annual rate of 39% during the two-year period around the IPO. Evidence shows that the most likely channel through which IPO firms can increase their employment is the relaxation of financial constraints, allowing firms to access both equity and debt markets for better funding of their growth opportunities and investment in human capital. We also examine the relation between employment growth and firm performance: IPO firms with greater employment growth exhibit better performance and lower delisting probability. Overall, these results highlight the importance of the IPO event and access to public capital markets for job creation by US firms.

Number of Pages in PDF File: 51

Keywords: IPOs, Employment growth, Financial constraints, Corporate growth

JEL Classification: G32, G34

working papers series