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The competitive effects of IPOs on industry rivals

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  • Joseph J. Henry

Abstract

I study the impact of initial public offerings (IPOs) on industry rival performance. Instrumenting for IPO completion with post‐IPO filing NASDAQ returns, I find no impact of IPOs on average rival sales growth, return on sales (ROS), or Tobin’s q after 3 years. However, post‐IPO rival performance varies with rival financial constraints. Relative to peers, rivals with low cash or high leverage exhibit lower sales growth, ROS, and q values, accompanied by lower capital expenditures and employment growth. I provide causal evidence of the competitive impact of IPOs and highlight the competitive cost of financial constraints following industry IPO activity.

Suggested Citation

  • Joseph J. Henry, 2023. "The competitive effects of IPOs on industry rivals," Review of Financial Economics, John Wiley & Sons, vol. 41(1), pages 86-106, January.
    • Handle: RePEc:wly:revfec:v:41:y:2023:i:1:p:86-106
    DOI: 10.1002/rfe.1162
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