Initial Public Offerings and the Local Economy
46 Pages Posted: 14 Sep 2017 Last revised: 27 Jul 2022
Date Written: July 25, 2022
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