Cash to Spend: IPO Wealth and House Prices
Forthcoming, Real Estate Economics
76 Pages Posted: 16 Feb 2019 Last revised: 1 Aug 2022
Date Written: July 18, 2022
Abstract
This study demonstrates the impact of initial public offerings (IPOs) on local house prices. Applying spatial difference-in-differences methods to IPOs in California from 1993 to 2017, we find house prices increase by 0.7% to 0.9% near an IPO firm’s headquarters around filing and issuing dates. Upon lock-up expiration, price changes depend on post-issuance returns. Treating the San Francisco Bay as a commuting barrier, we identify sustained price increases after filings and temporary increases after issuing and lock-up expiration. We also confirm post-IPO price divergence between the treatment and synthetic control areas. Our findings indicate the effect of liquid wealth under mild financial constraints.
Keywords: Initial Public Offerings, Financial Constraints, Executive Compensation, Liquidity, Spatial Difference-In-Differences, Synthetic Control Methods
JEL Classification: L26, M12, J33, R21
Suggested Citation: Suggested Citation