Abstract
AbstractI study the impact of initial public offerings (IPOs) on industry rival performance. Instrumenting for IPO completion with post‐IPO filing NASDAQ returns, I find no impact of IPOs on average rival sales growth, return on sales (ROS), or Tobin’s q after 3 years. However, post‐IPO rival performance varies with rival financial constraints. Relative to peers, rivals with low cash or high leverage exhibit lower sales growth, ROS, and q values, accompanied by lower capital expenditures and employment growth. I provide causal evidence of the competitive impact of IPOs and highlight the competitive cost of financial constraints following industry IPO activity.
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