The competitive effects of IPOs on industry rivals

Joseph J. Henry

Review of Financial Economics, 2023, vol. 41, issue 1, 86-106

Abstract: I 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.

Date: 2023
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https://doi.org/10.1002/rfe.1162

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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:41:y:2023:i:1:p:86-106

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