Initial Public Offerings and the Local Economy

We test the effect of going public on economic growth in the areas surrounding IPO firms. We focus on IPO-filing firms, thus ensuring that both treatment and control firms are at similar life cycle stages. We then use post-filing stock market fluctuations as an instrument for IPO completion and show that counties hosting large companies that go public experience reduced growth in employment, establishments, and population. These large negative effects suggest substantial spillovers on location and hiring decisions of other businesses in close geographic proximity. 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

Suggested Citation: Suggested Citation

Cornaggia, Jess and Gustafson, Matthew and Kotter, Jason D. and Pisciotta, Kevin, Initial Public Offerings and the Local Economy (July 25, 2022). Available at SSRN: https://ssrn.com/abstract=3036176 or http://dx.doi.org/10.2139/ssrn.3036176