Working Paper: NBER ID: w25634
Authors: Vojislav Maksimovic; Gordon M. Phillips; Liu Yang
Abstract: We track firms at birth and compare the growth pattern of IPO firms and their birth-matched counterparts. Firms that are larger at birth with faster initial growth are more likely to attain a larger size later in life and go public. Firms in the top percentile of predicted propensity to go public grow 29 times larger fifteen years later than matched firms if they actually become public, and 14 times larger if they stay private, showing a large selection effect. We show that public firms, and especially those public firms backed by venture capital, respond more to demand shocks post-IPO.
Keywords: Public Firms; Private Firms; Firm Quality; Growth Opportunities; IPO
JEL Codes: G20; G24; G3; G32; L1; L22; L23; L25; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| initial conditions at birth (J13) | future firm size (L25) |
| initial conditions at birth (J13) | likelihood of going public (G24) |
| public status (Y70) | growth pattern of firms (D25) |
| public status (Y70) | responsiveness to product market growth opportunities (L25) |
| initial firm quality (L15) | ability to respond to growth opportunities (D25) |