Local Economic Spillover Effects of Stock Market Listings

Abstract

We show that IPOs have non-trivial positive spillover effects on local labor markets, business environments, consumer spending, real estate, and migration. We mitigate endogeneity concerns about unobserved heterogeneity with restrictive geographic fixed effects coupled with a matching procedure. We show that it is the listing decision, which encompasses both a wealth and liquidity shock, that induces economic spillovers. Conditional on an IPO occurring, we estimate that an additional $10 million in IPO proceeds is associated with an extra 41 jobs and 0.7 new establishments locally.

Keywords: IPOs, Per Capita Income, Economic Growth, Listing Status, Spillover