“How Public Markets Forster Firm Standardization: Evidence from Chinese IPOs” by Sabrina T. Howell
Prof. Sabrina Howell
New York University Stern
To go public, private firms must (a) commit going-concern value to arm’s length financiers, (b) minimize concerns about agency conflicts, and (c) reduce perceived information asymmetry. We use IPO suspensions in China to explore how public market access affects this standardization process. Among firms already approved to IPO, the surprise suspensions of indeterminate length caused plausibly exogenous and uncertain listing delay. We find that suspension-induced delay negatively affects proxies for all three standardization activities, with especially large effects on patent applications. Responsiveness varies with venture capital backing. Neither window dressing nor a capital supply shock can independently explain the results.