Initial Public Offerings and the Local Economy
57 Pages Posted: 14 Sep 2017 Last revised: 31 Jan 2019
Date Written: January 15, 2019
We provide evidence that a firm’s transition from private to public ownership stunts local economic growth, especially in less populated and poorer areas. After accounting for endogeneity in the ownership decision, areas hosting companies that go public experience muted growth in employment, establishments, population, and wages, relative to areas where firms remain private. Establishment-level analyses and tests of IPO filer acquisition activity reveal that transitioning to public ownership causes firms to geographically diversify their establishments and employee base. These findings are consistent with public ownership reducing a firm’s reliance on local agglomeration economies, to the detriment of the local community.
Keywords: IPO, Economic Growth
JEL Classification: G38, J61, J21, G30, G32
Suggested Citation: Suggested Citation