Agglomeration Effects in Initial Public Offerings
58 Pages Posted: 28 Apr 2023 Last revised: 1 May 2024
Date Written: October 07, 2024
Abstract
We show that the decision to go public is influenced by the spatial variation in the supply of equity financing. We measure the amount of capital of equity investors in each U.S. region and document that the incidence of initial public offerings (IPOs) by intangible-intensive resident firms increases significantly when regional equity capital is abundant. Using a novel empirical strategy and hand-collected data on out-of-state pension flows, we confirm that our findings are not due to underlying regional factors. Overall, our evidence is consistent with Holmstrom and Tirole's (1997) prediction that monitoring capital unlocks financing opportunities for intangible-intensive firms.
Keywords: IPOs, Agglomeration, Intangible Assets
JEL Classification: G20, G23, G14
Suggested Citation: Suggested Citation