IPO peer effects

Cyrus Aghamolla and Richard Thakor

Journal of Financial Economics, 2022, vol. 144, issue 1, 206-226

Abstract: This study investigates whether a private firm’s decision to go public affects the IPO decisions of its competitors. Using detailed data from the drug development industry, we identify a private firm’s direct competitors at a precise level through a novel approach using similarity in drug development projects based on disease targets. The analysis shows that a private firm is significantly more likely to go public after observing the recent IPO of a direct competitor, and this effect is distinct from “hot” market effects or other common shocks. Furthermore, our effects are centered on firms that operate in more competitive areas. We additionally explore peer effects in private firm funding propensities more broadly, such as through venture capital or being acquired, and find results consistent with a competitive channel.

Keywords: Initial public offerings; IPO Propensity; Peer effects; R&D competition; Information spillovers; Venture capital (search for similar items in EconPapers)
JEL-codes: C31 D22 G14 G32 O31 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:144:y:2022:i:1:p:206-226

DOI: 10.1016/j.jfineco.2021.05.055

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