Abstract

http://ssrn.com/abstract=314277
 
 

References (35)



 
 

Citations (16)



 


 



IPOs and the Growth of Firms


Gian Luca Clementi


New York University - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER); University of Bologna - Rimini Center for Economic Analysis (RCEA)

April 3, 2002

NYU Stern 2004 Working Paper No. 04-23

Abstract:     
Recent years have witnessed a rapid accumulation of empirical evidence documenting firm dynamics around the IPO date. A particularly striking finding is that operating performance, as measured by Returns on Assets for example, peaks in the fiscal year preceding the offering, worsens on impact at the IPO date, and keeps on declining for a few more years. In this paper, I provide a novel rationalization of this evidence. To this end, I construct a simple dynamic stochastic model of firm behavior in which the decision to go public is modelled explicitly. The model predicts that the operating performance reaches its peak in the period before the offering and experiences a sudden decline at the IPO date. The comparative advantage of my approach is that it produces further implications that are in line with the data. Most importantly, the model predicts that the IPO coincides with an increase in sales and capital expenditures. Consistently with evidence pointed out by the Industrial Organization literature, the firm growth rate is shown to be decreasing in age and size.

Number of Pages in PDF File: 47

JEL Classification: D21, D92, G32

working papers series





Download This Paper

Date posted: June 9, 2002  

Suggested Citation

Clementi, Gian Luca, IPOs and the Growth of Firms (April 3, 2002). NYU Stern 2004 Working Paper No. 04-23. Available at SSRN: http://ssrn.com/abstract=314277 or http://dx.doi.org/10.2139/ssrn.314277

Contact Information

Gian Luca Clementi (Contact Author)
New York University - Leonard N. Stern School of Business ( email )
44 W Fourth Street
New York, NY 10012
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )
Via Patara, 3
Rimini (RN), RN 47900
Italy
Feedback to SSRN


Paper statistics
Abstract Views: 1,675
Downloads: 510
Download Rank: 30,876
References:  35
Citations:  16

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.328 seconds