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Firm Mortality and Natal Financial Care

91 Pages Posted: 28 Jul 2010 Last revised: 12 May 2014

Utpal Bhattacharya

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management

Alexander Borisov

University of Cincinnati - Department of Finance - Real Estate

Xiaoyun Yu

Indiana University - Kelley School of Business - Department of Finance; China Academy of Financial Research (CAFR)

Date Written: December 24, 2012

Abstract

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.

Keywords: firm mortality, survival risk, initial public offerings, underwriters, venture capital

JEL Classification: D21, D53, E32, G24, G33

Suggested Citation

Bhattacharya , Utpal and Borisov, Alexander and Yu, Xiaoyun, Firm Mortality and Natal Financial Care (December 24, 2012). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1649732 or http://dx.doi.org/10.2139/ssrn.1649732

Utpal Bhattacharya (Contact Author)

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management ( email )

Clear Water Bay
Kowloon
Hong Kong

Alexander Borisov

University of Cincinnati - Department of Finance - Real Estate ( email )

College of Business Administration
Cincinnati, OH 45221
United States

Xiaoyun Yu

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3521 (Phone)
812-855-5875 (Fax)

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

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