IPOs and the Local Economy
42 Pages Posted: 14 Sep 2017
Date Written: August 28, 2017
We examine how initial public offerings (IPOs) affect the local economy. We find a positive correlation between IPOs and measures of local economic activity such as employment and establishment growth rates. However, after correcting for endogeneity, opposite results emerge. We find robust evidence that IPOs cause declines in employee and establishment growth rates. We also find that wage and population growth rates decline. These effects are most pronounced in poor counties. We also find that firms in poor areas exhibit greater geographic dispersion after their IPOs. Together, these results indicate that IPOs result in firms outgrowing their local economies, leading to less economic growth in the areas where they originate.
Keywords: IPO, Economic Growth
JEL Classification: G38, J61, J21, G30, G32
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