Work

The Effects of Going Public on Firm Profitability and Strategy

Year: 2025

Type: article

Abstract: We study the effects of going public using a unique panel of firms in 16 European countries for which we observe financial data before and after initial public offering (IPO) attempts. We compare completed and withdrawn IPO attempts. We instrument the decision to complete the IPO using prior market returns. After instrumenting, we isolate a positive causal effect of going public on profitability. We also find a post-IPO expansion in sales per employee, subsidiaries, and countries in which firms operate. Overall, our results are consistent with going public relaxing financial constraints and inducing a shift in strategy towards increased commercialization.

Source: Review of Financial Studies

DOI: 10.1093/rfs/hhaf026

Authors: Borja Larrain, Gordon M Phillips, Giorgo Sertsios, Francisco Urzúa I

Institutions: Pontificia Universidad Católica de Chile, Dartmouth College, National Bureau of Economic Research, University of Wisconsin–Milwaukee, City, University of London, City St George's, University of London

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W4409737449

FWCI: 24.3

Cites: 69

Cited by: 17

Related to: 10