Do Public Firms Respond to Industry Opportunities More than Private Firms? The Impact of Initial Firm Quality

55 Pages Posted: 27 Dec 2017 Last revised: 18 Mar 2019

See all articles by Vojislav Maksimovic

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Liu Yang

University of Maryland

Multiple version iconThere are 3 versions of this paper

Date Written: March 1, 2019

Abstract

We track firms at birth and compare the growth pattern of IPO firms and their birth-matched counterparts. Firms that are larger at birth with faster initial growth are more likely to attain a larger size later in life and go public. Firms in the top percentile of predicted propensity to go public grow 29 times larger fifteen years later than matched firms if they actually become public, and 14 times larger if they stay private, showing a large selection effect. We show that public firms, and especially those public firms backed by venture capital, respond more to demand shocks post-IPO.

Keywords: IPOs, Public Firms, Private Firms, Myopia

JEL Classification: G20, G23, G24, G32

Suggested Citation

Maksimovic, Vojislav and Phillips, Gordon M. and Yang, Liu A., Do Public Firms Respond to Industry Opportunities More than Private Firms? The Impact of Initial Firm Quality (March 1, 2019). Tuck School of Business Working Paper No. 3093125. Available at SSRN: https://ssrn.com/abstract=3093125 or http://dx.doi.org/10.2139/ssrn.3093125

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://scholar.rhsmith.umd.edu/vmax/home

Gordon M. Phillips (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Liu A. Yang

University of Maryland ( email )

College Park
College Park, MD 20742
United States

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