The Impact of IPOs on Innovations: Short-Termism or Initial Governance Force Exit?

Managerial and Decision Economics 2020; https://onlinelibrary.wiley.com/doi/full/10.1002/mde.3148

Posted: 16 Sep 2020

See all articles by Xiangchao Hao

Xiangchao Hao

Institute of Finance, School of Economics, Nankai University

Qingbin Meng

affiliation not provided to SSRN

Kaijuan Gao

Business School, Hunan University

Kam C. Chan

Western Kentucky University - Department of Accounting and Finance

Date Written: May 18, 2020

Abstract

We study the impact of initial public offerings (IPOs) on corporate innovations in China. The findings suggest that going public significantly impedes corporate innovations by lowering overall innovation quality. For firms with shareholders selling or pledging less shares after IPO, the number of patents increases but the non-self-citations per patent decrease relative to matched non-IPO firms. In contrast, for firms with shareholders selling or pledging more shares after IPOs, both the number of patents and non-self-citations per patent decrease. The magnitudes of impact in the latter are stronger than those of former, supporting the initial governance force exit hypothesis.

Keywords: Initial public offerings; innovation quality; short-termism; initial governance force exit; China

JEL Classification: G34; O31

Suggested Citation

Hao, Xiangchao and Meng, Qingbin and Gao, Kaijuan and Chan, Johnny, The Impact of IPOs on Innovations: Short-Termism or Initial Governance Force Exit? (May 18, 2020). Managerial and Decision Economics 2020; https://onlinelibrary.wiley.com/doi/full/10.1002/mde.3148, Available at SSRN: https://ssrn.com/abstract=3603769

Xiangchao Hao (Contact Author)

Institute of Finance, School of Economics, Nankai University ( email )

No. 94, Wenjin Road
Tianjin, TianJin 300071
China

Qingbin Meng

affiliation not provided to SSRN

Kaijuan Gao

Business School, Hunan University ( email )

Changsha, Hunan
China

Johnny Chan

Western Kentucky University - Department of Accounting and Finance ( email )

Bowling Green, KY 42101
United States

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