The Geography of Initial Public Offerings
53 Pages Posted: 28 Apr 2023 Last revised: 14 Nov 2023
Date Written: November 12, 2023
We show that the decision to go public is influenced by the geographic 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 resident firms facing collateral constraints 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 collateral-constrained firms.
Keywords: IPOs, Agglomeration, Equity capital, Venture capital
JEL Classification: G20, G23, G14
Suggested Citation: Suggested Citation