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The impact of initial public offerings on innovations: Short‐termism or initial governance force exit?

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  • Xiangchao Hao
  • Qingbin Meng
  • Kaijuan Gao
  • Kam C. Chan

Abstract

We study the impact of initial public offerings (IPOs) on corporate innovations in China. The findings suggest that going public significantly impedes corporate innovations by lowering overall innovation quality. For firms with shareholders selling or pledging less shares after IPO, the number of patents increases, but the nonself‐citations per patent decrease relative to matched non‐IPO firms. In contrast, for firms with shareholders selling or pledging more shares after IPOs, both the number of patents and nonself‐citations per patent decrease. The magnitudes of impact in the latter are stronger than those of former, supporting the initial governance force exit hypothesis.

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  • Xiangchao Hao & Qingbin Meng & Kaijuan Gao & Kam C. Chan, 2020. "The impact of initial public offerings on innovations: Short‐termism or initial governance force exit?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(6), pages 924-942, September.
    • Handle: RePEc:wly:mgtdec:v:41:y:2020:i:6:p:924-942
    DOI: 10.1002/mde.3148
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