What is the effect of an additional dollar of IPO proceeds?

Michael Dambra, Matthew T. Gustafson, Kevin Pisciotta

Research output: Contribution to journalArticlepeer-review

Abstract

We examine the effect of IPO proceeds on post-IPO liquidity and market monitoring. To do so we exploit variation in the amount of proceeds raised that is unrelated to firm size and manager decisions using an instrumental variable approach. We find that marginal increases in IPO proceeds lead to large increases in liquidity, analyst coverage, and institutional ownership in the first two years a firm is public. Increases in IPO proceeds also lead to more frequent follow-on offerings and longer survival as a public firm. We find evidence that immediate shocks to ownership dispersion represent one plausible channel through which changes in IPO proceeds affect long-run liquidity and market monitoring. Overall, our findings support the theoretical liquidity and market quality benefits associated with reductions in ownership concentration.

Original languageEnglish (US)
Article number101795
JournalJournal of Corporate Finance
Volume66
DOIs
StatePublished - Feb 2021

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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