Macroeconomics, firm dynamics and IPOs
Beatriz González ()
Additional contact information
Beatriz González: Banco de España
No 2030, Working Papers from Banco de España
This paper extends a model of firm dynamics to incorporate heterogeneous privately held and publicly traded firms facing different financial frictions, and the decision to become publicly traded (Initial Public Offering, or IPO) is endogenous. This allows changes in the economic environment to affect these firms differently, impacting the selection into becoming publicly traded, and its macroeconomic outcomes. Firms are born privately held and small due to financial frictions. They finance investment with internal resources and debt and have the choice to go public (IPO). The main trade-off is access to external equity financing, at a one-off cost of IPO and an increased cost of operation. The calibrated model is successful in capturing the size distribution of firms, the share of publicly traded firms, and the dynamics around the IPO date. The decrease in corporate and dividend taxes experienced from the 1970s to the 1990s benefited more publicly traded firms financing with equity at the margin. This helps explaining the stock market boom, and the observed changes in the characteristics of firms going public, their investment and payout behavior. I perform some counterfactual exercises to understand what could be the reasons behind the decrease in publicly traded firms since the 2000s: increased cost of being public, increased access to debt, or changes in the idiosyncratic shock process. I find these changes are consistent with part (though not all) of the changes in IPO choice, payout and investment behavior of publicly traded firms in this period.
Keywords: firm life cycle; macroeconomics; fiscal policy; corporate finance; IPO (search for similar items in EconPapers)
JEL-codes: D25 E23 G32 G35 H25 H32 (search for similar items in EconPapers)
Pages: 58 pages
New Economics Papers: this item is included in nep-cfn, nep-dge, nep-ent and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 20/Files/dt2030e.pdf First version, October 2020 (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2030
Access Statistics for this paper
More papers in Working Papers from Banco de España
Bibliographic data for series maintained by María Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de España ().