Post-IPO Geographic Expansion

Abstract

Transitioning to public ownership affects where firms invest. Post-IPO, we find that firms conduct more geographically diversifying acquisitions on the intensive and extensive margins, relative to both withdrawn IPO filings and seasoned matched peers. The effect is larger for IPO filers that are large relative to their local economy, and smaller for IPOs led by less active underwriters. We find little evidence of geographic expansion after seasoned equity offerings, suggesting that capital raised does not drive the expansion decision. Our results suggest that going public alleviates significant geographic-based information frictions faced by private firms.

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

JEL Classification: G20, G30, G32, G34