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IPOs and the Local Economy

42 Pages Posted: 14 Sep 2017  

Jess Cornaggia

Pennsylvania State University - Department of Finance

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Kevin J. Pisciotta

University of Kansas - School of Business

Date Written: August 28, 2017

Abstract

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

Suggested Citation

Cornaggia, Jess and Gustafson, Matthew and Pisciotta, Kevin J., IPOs and the Local Economy (August 28, 2017). Available at SSRN: https://ssrn.com/abstract=3036176 or http://dx.doi.org/10.2139/ssrn.3036176

Jess Cornaggia (Contact Author)

Pennsylvania State University - Department of Finance ( email )

University Park, PA 16802
United States

HOME PAGE: http://jesscornaggia.com

Matthew Gustafson

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Kevin Pisciotta

University of Kansas - School of Business ( email )

Capital Federal Hall
1654 Naismith Dr
Lawrence, KS 66045
United States

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