Initial Public Offerings and the Local Economy

Abstract

We find that areas hosting large companies that go public experience muted growth in employment, establishments, and population, relative to areas where similar firms remain private. These effects initiate in the tradable sector and follow in the non-tradable sector, are more pronounced in densely populated areas, and are strongest near the IPO firm’s headquarters. Establishment-level analyses suggest that 24% to 37% of the effect derives directly from the firm itself with the remaining portion being due to spillover effects. Overall, our results indicate that macroeconomic gains from IPOs trade off against disruptions in local agglomeration economies where public firms originate.

Keywords: IPO, Economic Growth

JEL Classification: G32, J21, O47, R11