Are Public Firms Really Myopic? Evidence from Matching IPO Firms at Birth

58 Pages Posted: 9 Apr 2020

See all articles by Vojislav Maksimovic

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Liu Yang

University of Maryland, Robert H. Smith School of Business

Date Written: March 1, 2020

Abstract

We track firms at birth and compare the growth and responsiveness to demand shocks of IPO firms and their birth-matched counterparts. Firms that are larger at birth with faster initial growth are more likely to 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. We show that public firms, especially those public firms backed by venture capital, grow faster, respond more to demand shocks and gain higher efficiency post-IPO. Our results show that the growth patterns of public firms are predictable before their IPOs and are inconsistent with public firms being short-term orientated.

Keywords: Private and Public Firm Growth, IPOs, Birth, Myopia

JEL Classification: G20, G32

Suggested Citation

Maksimovic, Vojislav and Phillips, Gordon M. and Yang, Liu A., Are Public Firms Really Myopic? Evidence from Matching IPO Firms at Birth (March 1, 2020). Tuck School of Business Working Paper No. 3554768, Available at SSRN: https://ssrn.com/abstract=3554768 or http://dx.doi.org/10.2139/ssrn.3554768

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://scholar.rhsmith.umd.edu/vmax/home

Gordon M. Phillips (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Liu A. Yang

University of Maryland, Robert H. Smith School of Business ( email )

4420 Van Munching Hall
Robert.H.Smith School of Business
College Park, MD 20742
United States
3014058794 (Phone)

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