The Effects of Going Public on Firm Profitability and Strategy

65 Pages Posted: 21 Apr 2021 Last revised: 27 Mar 2023

See all articles by Borja Larrain

Borja Larrain

Pontificia Universidad Catolica de Chile

Gordon M. Phillips

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

Giorgo Sertsios

Universidad de los Andes, Chile

Francisco Urzúa I.

City University London - Bayes Business School

Multiple version iconThere are 2 versions of this paper

Date Written: October 5, 2022

Abstract

We study the effects of going public using a unique panel of firms in 16 European countries for which we observe financial data before and after initial-public-offering (IPO) attempts. We compare completed and withdrawn IPO attempts. We instrument for the decision to complete the IPO using prior market returns. After instrumenting, we find a positive effect of going public on profitability, contrary to previous results. We also find a post-IPO expansion in sales per employee, subsidiaries, and countries in which firms operate. Overall, our results are consistent with going public inducing a shift in strategy towards increased commercialization.

Keywords: IPOs, Profitability, Commercialization, Instrumental Variables, Selection, Treatment

JEL Classification: G32

Suggested Citation

Larrain, Borja and Phillips, Gordon M. and Sertsios, Giorgo and Urzua, Francisco, The Effects of Going Public on Firm Profitability and Strategy (October 5, 2022). Tuck School of Business Working Paper No. 3830690, Available at SSRN: https://ssrn.com/abstract=3830690 or http://dx.doi.org/10.2139/ssrn.3830690

Borja Larrain (Contact Author)

Pontificia Universidad Catolica de Chile ( email )

Ave. Vicuna Mackenna 4860, Macul
Santiago
Chile

HOME PAGE: http://sites.google.com/view/borja-larrain

Gordon M. Phillips

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Giorgo Sertsios

Universidad de los Andes, Chile ( email )

Mons. Álvaro del Portillo
Las Condes
Santiago, 12.455
Chile

Francisco Urzua

City University London - Bayes Business School ( email )

United Kingdom

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