Initial Public Offerings Over the Industry Life Cycle

Abstract

We provide new evidence on IPOs over the industry life cycle. Less innovative, financially constrained firms seek public equity earlier in an industry’s life cycle. Moreover, average profitability of early IPOs is lower when more private capital flows to the industry early in its growth phase. Our results suggest that availability of private capital enables better-performing firms to avoid early public issuance without incurring a long-term product market disadvantage. However, delayed IPOs carry a cost for public investors. By the time late issuers tap public markets, the period of high market-share growth and high returns for equity investors has passed.