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The growth process of IPO firms

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  • Lefebvre, Vivien

Abstract

This study explores initial public offering (IPO) firms’ growth processes. Building on the idea that going public relaxes financial constraints and thus facilitates growth, this study uses an international sample of European IPO firms matched with comparable non-IPO firms to investigate whether and in which dimensions IPO firms grow faster than non-IPO firms do. Consistent with the Penrosean theory of growth, the results show that IPO firms grow first by acquiring fixed assets immediately after the listing and then by acquiring an additional workforce, corresponding to the resource acquisition stage of growth. The performance-enhancing stage of growth, during which IPO firms grow in sales, occurs later and culminates three years after an IPO. In addition, IPO firms are more likely to experience high-growth episodes in sales, but not in employment, than non-IPO firms. Overall, this study highlights the role of financing decisions in growth processes.

Suggested Citation

  • Lefebvre, Vivien, 2023. "The growth process of IPO firms," Journal of Business Venturing Insights, Elsevier, vol. 19(C).
    • Handle: RePEc:eee:jobuve:v:19:y:2023:i:c:s2352673423000069
    DOI: 10.1016/j.jbvi.2023.e00377
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    Cited by:

    1. Cabral, Joseph J. & Kumar, M.V. Shyam, 2023. "The impact of underpricing on newly public firm investments," Journal of Business Venturing Insights, Elsevier, vol. 19(C).

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    More about this item

    Keywords

    Initial public offerings; Growth; Financial constraints;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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