The Effects of Going Public on Firm Performance and Commercialization Strategy: Evidence from International IPOs

60 Pages Posted: 21 Apr 2021 Last revised: 17 Oct 2022

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 firms' initial-public-offering (IPO) attempts. We compare firms that complete their IPO with firms that withdraw their IPO. We instrument the going public decision using prior market returns. We find that firm profitability goes up after going public - contrary to previous results in the literature. We also find an post-IPO expansion in the number of subsidiaries and countries in which IPO firms operate. Our results are stronger for firms in financially dependent industries and in countries with higher investor protection consistent with going public relaxing financial constraints and with a stronger impact when agency conflicts are lower. Overall, our results are consistent with going public inducing a shift towards a strategy of commercialization to increase profitability.

Keywords: IPOs, Profitability, Commercialization, Instrumental Variables

JEL Classification: G32

Suggested Citation

Larrain, Borja and Phillips, Gordon M. and Sertsios, Giorgo and Urzua, Francisco, The Effects of Going Public on Firm Performance and Commercialization Strategy: Evidence from International IPOs (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)

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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