Going Public and the Internal Organization of the Firm

104 Pages Posted: 19 May 2022 Last revised: 16 Nov 2024

See all articles by Daniel Bias

Daniel Bias

Owen Graduate School of Management at Vanderbilt University

Benjamin Lochner

Institute for Employment Research (IAB); University of Erlangen-Nürnberg (FAU)

Stefan Obernberger

Erasmus University Rotterdam - Erasmus School of Economics; Erasmus Research Institute of Management (ERIM)

Merih Sevilir

Halle Institute for Economic Research; ESMT European School of Management and Technology

Date Written: July 22, 2022

Abstract

This paper examines how Initial Public Offerings (IPOs) affect firms’ internal organization. We find that IPO firms transform into more hierarchical and standardized organizations, characterized by additional layers, more managers, smaller control spans, and larger administrative functions. These changes occur mostly in preparation for the IPO, are specific to equity financing through an IPO, and cannot be explained by growth. IPO firms with higher human capital risk and stricter listing requirements display larger hierarchical changes. Our results highlight that firms need to reduce dependence on key individuals' human capital and to manage increased operational complexity when transitioning to public markets.

Keywords: IPOs, Going Public, External Financing, Organizational Economics, Human Resource Management

JEL Classification: G32, G34, M50, D20

Suggested Citation

Bias, Daniel and Lochner, Benjamin and Obernberger, Stefan and Sevilir, Merih, Going Public and the Internal Organization of the Firm (July 22, 2022). Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2022, Available at SSRN: https://ssrn.com/abstract=4112225 or http://dx.doi.org/10.2139/ssrn.4112225

Daniel Bias

Owen Graduate School of Management at Vanderbilt University ( email )

2301 Vanderbilt Place
Nashville, TN 37240
United States

Benjamin Lochner

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

University of Erlangen-Nürnberg (FAU) ( email )

Erlangen-Nuremberg
Germany

Stefan Obernberger (Contact Author)

Erasmus University Rotterdam - Erasmus School of Economics ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Merih Sevilir

Halle Institute for Economic Research

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

ESMT European School of Management and Technology

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