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

56 Pages Posted: 12 Mar 2019 Last revised: 18 Jul 2021

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, Robert H. Smith School of Business

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Date Written: March 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.

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 2019). NBER Working Paper No. w25634, Available at SSRN: https://ssrn.com/abstract=3350404

Vojislav Maksimovic (Contact Author)

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

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Gordon M. Phillips

Dartmouth College - Tuck School of Business ( email )

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United States

National Bureau of Economic Research (NBER)

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Liu A. Yang

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

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Robert.H.Smith School of Business
College Park, MD 20742
United States
3014058794 (Phone)

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