“IPOs and the Local Economy” by Dr. Jess Cornaggia
The Pennsylvania State University
We examine how initial public offerings (IPOs) affect the local economy. We find robust evidence that, relative to areas where firms randomly withdraw their IPO filings, areas hosting completed IPOs experience muted growth in employment, establishments, population, and wages. These effects are most pronounced in poor areas. Further, firms in poor areas exhibit greater geographic dispersion after their IPOs. Overall, these results indicate that the IPO process allows firms and their employees to expand beyond their local agglomeration, leading to a disruption in agglomeration economies and weaker economic growth in the areas where issuers originate.