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Do Public Firms Respond to Industry Opportunities More Than Private Firms? The Impact of Initial Firm Quality

Author

Listed:
  • Vojislav Maksimovic
  • Gordon M. Phillips
  • Liu Yang

Abstract

We track firms at birth and compare the growth pattern of IPO firms and their birth-matched counterparts. Firms that are larger at birth with faster initial growth are more likely to attain a larger size later in life and 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, showing a large selection effect. We show that public firms, and especially those public firms backed by venture capital, respond more to demand shocks post-IPO.

Suggested Citation

  • Vojislav Maksimovic & Gordon M. Phillips & Liu Yang, 2019. "Do Public Firms Respond to Industry Opportunities More Than Private Firms? The Impact of Initial Firm Quality," NBER Working Papers 25634, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25634
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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