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Access to Public Capital Markets and Employment Growth

62 Pages Posted: 20 Nov 2012 Last revised: 3 Sep 2017

Alexander Borisov

University of Cincinnati - Department of Finance - Real Estate

Andrew Ellul

Indiana University - Kelley School of Business - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); University of Naples Federico II - CSEF - Center for Studies in Economics and Finance

Merih Sevilir

Indiana University - Kelley School of Business - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: August 31, 2017

Abstract

We use the context of initial public offerings (IPOs) as a laboratory to examine the link between access to public capital markets, and the consequent relaxation of the financial constraints of firms, and their long-term employment decisions. To address endogeneity issues, we use a novel dataset of private firms and investigate employment growth in IPO firms relative to two control groups: First, a matched sample of private firms that never file for an IPO, and second, a group of private firms that file for an IPO but eventually withdraw their offering due to exogenous reasons. We show that employment growth increases after going public relative to each control group and the effect of access to public capital markets on human capital investment is not temporary but more persistent. The most likely channel for the observed employment dynamics is relaxation of financial constraints, allowing newly public firms to access both equity and debt markets for funding investment in human capital. Overall, these results highlight the importance of public capital markets for job creation over long-term horizons.

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

JEL Classification: G32, G34

Suggested Citation

Borisov, Alexander and Ellul, Andrew and Sevilir, Merih, Access to Public Capital Markets and Employment Growth (August 31, 2017). Available at SSRN: https://ssrn.com/abstract=2178101 or http://dx.doi.org/10.2139/ssrn.2178101

Alexander Borisov

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

College of Business Administration
Cincinnati, OH 45221
United States

Andrew Ellul

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

1309 E. 10th St.
Bloomington, IN 47405
United States

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

University of Naples Federico II - CSEF - Center for Studies in Economics and Finance ( email )

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

Merih Sevilir (Contact Author)

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

1309 E. 10th St.
Bloomington, IN 47405
United States

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