Does going global or staying local improve the long‐term survival and performance of IPOs?

Abstract

Research Summary: This empirical study investigates the impact of internationalization on the long‐term performance of U.S. IPOs (initial public offerings). We find that internationalized IPOs exhibit higher survival rates, and if an internationalized IPO is subsequently delisted, that delisting is significantly more likely to result in a positive outcome when compared to the delisting outcomes for domestic‐only IPOs. In addition, over 5‐ and 10‐year holding periods following the IPO, a portfolio of the internationalized firms exhibits significantly positive risk‐adjusted abnormal stock returns, whereas the return for a portfolio of the domestic‐only firms was lower and generally not significantly different than zero. In short, we add to the existing literature on factors that influence IPO survival and performance and show that internationalization also is an important firm characteristic. Managerial Summary: We examine the impact of internationalization on the survival and stock return performance of IPO firms. More specifically, we investigate the performance of two categories of U.S. IPOs: companies that go public and have international operations and companies that are purely domestic firms. Our results suggest that IPO firms that are internationalized have higher survival rates than domestic‐only firms and also enjoy superior subsequent stock performance. This study provides novel insights and additional descriptive evidence that going global is better for the survival and performance of IPOs.