Does Being Private Constrain Geographic Expansion?

83 Pages Posted: 19 Jan 2021 Last revised: 21 Dec 2021

See all articles by Jess Cornaggia

Jess Cornaggia

Pennsylvania State University - Department of Finance

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Jason D. Kotter

Brigham Young University - Department of Finance

Kevin Pisciotta

University of Kansas - School of Business

Date Written: November 16, 2021

Abstract

Private firms are more geographically constrained than their public counterparts. After initial public offerings (IPOs), firms complete more geographically diverse acquisitions. Underwriter certification and access to underwriter networks positively predict this expansion. Neither the amount of capital raised in an IPO nor follow-on capital raised predicts geographic expansion. Post-IPO geographic expansion also manifests using measures of establishment distribution or SEC filings mentions, and intensive margin tests indicate that expansion is driven by more than simply post-IPO M&A increases. In sum, our findings suggest that information frictions constrain M&A-based expansion by private firms and impact how firms are spatially organized.

Keywords: Initial Public Offerings, M&A, Geographic Expansion, US Census

JEL Classification: G20, G30, G32, G34

Suggested Citation

Cornaggia, Jess and Gustafson, Matthew and Kotter, Jason D. and Pisciotta, Kevin, Does Being Private Constrain Geographic Expansion? (November 16, 2021). Available at SSRN: https://ssrn.com/abstract=3756590 or http://dx.doi.org/10.2139/ssrn.3756590

Jess Cornaggia

Pennsylvania State University - Department of Finance ( email )

University Park, PA 16802
United States

HOME PAGE: http://jesscornaggia.com

Matthew Gustafson

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Jason D. Kotter

Brigham Young University - Department of Finance ( email )

United States

Kevin Pisciotta (Contact Author)

University of Kansas - School of Business ( email )

Capital Federal Hall
1654 Naismith Dr
Lawrence, KS 66045
United States

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