Product Life-Cycle and Initial Public Offerings

60 Pages Posted: 3 Sep 2021 Last revised: 26 Sep 2021

See all articles by Tina Oreski

Tina Oreski

Swiss Finance Institute

Jiajie Xu

University of Iowa - Henry B. Tippie College of Business

Date Written: December 15, 2020


The paper examines how firms' product life-cycle (PLC) influences their trade-off between benefits and costs of going public. We construct the PLC measure by performing a textual analysis on S-1 registration statements for initial public offerings (IPOs). We show that firms with a more product-innovative PLC are more likely to complete the IPO even though they face higher underpricing and offer a lower fraction of equity at IPO. These firms conduct more seasoned equity offerings, payout fewer dividends, and conduct fewer acquisitions after IPO. The findings demonstrate that firms with diverging PLC differently weigh the importance of raising capital through IPO, information asymmetry with investors, and revealing information to competitors. To establish causality, we use an instrumental variable approach with the average PLC of similar public firms as the instrument for an IPO firm's PLC as well as a difference-in-differences approach exploiting the introduction of the American Inventors Protection Act. Our paper offers novel evidence on a previously under-explored economic force determining the trade-off of going public: firms' product life-cycle.

Keywords: Product life-cycles, Initial public offerings, Textual analysis, Competition, Information asymmetry

Suggested Citation

Oreski, Tina and Xu, Jiajie, Product Life-Cycle and Initial Public Offerings (December 15, 2020). Available at SSRN: or

Tina Oreski

Swiss Finance Institute ( email )

USI Lugano
Via Giuseppe Buffi 13
Lugano, 6900


Jiajie Xu (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

Pappajohn Business Building S296
Iowa City, IA 52242-1000
United States


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