The Effects of Going Public on Firm Profitability and Strategy

Borja Larrain; Gordon M. Phillips; Giorgo Sertsios; Francisco Urzúa I

doi:10.1093/rfs/hhaf026

The Effects of Going Public on Firm Profitability and Strategy

Borja Larrain, Gordon M. Phillips^*, Giorgo Sertsios, Francisco Urzúa I

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

1 Scopus citations

Abstract

We study the effects of going public using a unique panel of firms in 16 European countries for which we observe financial data before and after initial public offering (IPO) attempts. We compare completed and withdrawn IPO attempts. We instrument the decision to complete the IPO using prior market returns. After instrumenting, we isolate a positive causal effect of going public on profitability. We also find a post-IPO expansion in sales per employee, subsidiaries, and countries in which firms operate. Overall, our results are consistent with going public relaxing financial constraints and inducing a shift in strategy towards increased commercialization.

Original language	English
Pages (from-to)	2467-2514
Number of pages	48
Journal	Review of Financial Studies
Volume	38
Issue number	8
DOIs	https://doi.org/10.1093/rfs/hhaf026
State	Published - 1 Aug 2025
Externally published	Yes

Bibliographical note

Publisher Copyright:
© 2025 The Author(s). Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.

Access to Document

10.1093/rfs/hhaf026

Cite this

@article{77d84ef37ef24235935ff77020635231,

title = "The Effects of Going Public on Firm Profitability and Strategy",

abstract = "We study the effects of going public using a unique panel of firms in 16 European countries for which we observe financial data before and after initial public offering (IPO) attempts. We compare completed and withdrawn IPO attempts. We instrument the decision to complete the IPO using prior market returns. After instrumenting, we isolate a positive causal effect of going public on profitability. We also find a post-IPO expansion in sales per employee, subsidiaries, and countries in which firms operate. Overall, our results are consistent with going public relaxing financial constraints and inducing a shift in strategy towards increased commercialization.",

author = "Borja Larrain and Phillips, \{Gordon M.\} and Giorgo Sertsios and \{Urz{\'u}a I\}, Francisco",

year = "2025",

month = aug,

day = "1",

doi = "10.1093/rfs/hhaf026",

language = "English",

volume = "38",

pages = "2467--2514",

journal = "Review of Financial Studies",

issn = "0893-9454",

publisher = "Oxford University Press",

number = "8",

}

TY - JOUR

T1 - The Effects of Going Public on Firm Profitability and Strategy

AU - Larrain, Borja

AU - Phillips, Gordon M.

AU - Sertsios, Giorgo

AU - Urzúa I, Francisco

PY - 2025/8/1

Y1 - 2025/8/1

N2 - We study the effects of going public using a unique panel of firms in 16 European countries for which we observe financial data before and after initial public offering (IPO) attempts. We compare completed and withdrawn IPO attempts. We instrument the decision to complete the IPO using prior market returns. After instrumenting, we isolate a positive causal effect of going public on profitability. We also find a post-IPO expansion in sales per employee, subsidiaries, and countries in which firms operate. Overall, our results are consistent with going public relaxing financial constraints and inducing a shift in strategy towards increased commercialization.

AB - We study the effects of going public using a unique panel of firms in 16 European countries for which we observe financial data before and after initial public offering (IPO) attempts. We compare completed and withdrawn IPO attempts. We instrument the decision to complete the IPO using prior market returns. After instrumenting, we isolate a positive causal effect of going public on profitability. We also find a post-IPO expansion in sales per employee, subsidiaries, and countries in which firms operate. Overall, our results are consistent with going public relaxing financial constraints and inducing a shift in strategy towards increased commercialization.

UR - https://www.scopus.com/pages/publications/105011153366

U2 - 10.1093/rfs/hhaf026

DO - 10.1093/rfs/hhaf026

M3 - Article

AN - SCOPUS:105011153366

SN - 0893-9454

VL - 38

SP - 2467

EP - 2514

JO - Review of Financial Studies

JF - Review of Financial Studies

IS - 8

ER -

The Effects of Going Public on Firm Profitability and Strategy

Abstract

Bibliographical note

Access to Document

Other files and links

Fingerprint

Cite this