The New Game in Town: Competitive Effects of IPOs
Posted: 22 Mar 2009
Date Written: March, 20 2009
Abstract
We analyze the effect of Initial Public Offerings (IPOs) on industry competitors and provide evidence that firms experience negative stock price reactions to completed IPOs in their industry and positive stock price reactions to IPO withdrawals. Following a successful IPO in their industry, firms show significant deterioration in their operating performance. These results are consistent with the existence of IPO related competitive advantages through the loosening of financial constraints, financial intermediary certification, and the presence of knowledge capital. These aspects of competitiveness are significant in explaining the cross section of underperformance as well as survival probabilities for competing firms.
Keywords: IPOs, competitive effects, financial certification, knowledge capital
JEL Classification: G30
Suggested Citation: Suggested Citation
Adam V. Reed
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
European Corporate Governance Institute (ECGI) ( email )
c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium