Hostname: page-component-78c5997874-xbtfd Total loading time: 0 Render date: 2024-11-18T08:42:34.016Z Has data issue: false hasContentIssue false
  • English
  • Français

Local Economic Spillover Effects of Stock Market Listings

Published online by Cambridge University Press:  07 March 2019

Alexander W. Butler ,
Larry Fauver  and
Ioannis Spyridopoulos Open the ORCID record for Ioannis Spyridopoulos [Opens in a new window]
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

We show that initial public offerings (IPOs) have nontrivial positive spillover effects on local labor markets, business environments, consumer spending, real estate, and migration. We mitigate endogeneity concerns about unobserved heterogeneity with restrictive geographic fixed effects coupled with a matching procedure. We show that it is the listing decision, which encompasses both a wealth and liquidity shock, that induces economic spillovers. Conditional on an IPO occurring, we estimate that an additional $10 million in IPO proceeds is associated with an extra 41 jobs and 0.7 new establishments locally.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 54 , Issue 3 , June 2019 , pp. 1025 - 1050
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2019 

Footnotes

1

Without implicating them, we thank Dan Bradley, Jamie Brown, Lee Ann Butler, Deborah Fauver, Yianni Floros, Zoran Ivkovich, Paul Malatesta (the editor), Andy Naranjo, Jay Ritter (the referee), seminar participants at the NYSE, Iowa State University, Rice University, Baylor University, Vanderbilt University, University of Texas at El Paso, University of Tennessee, Cal Poly, University of Florida, Texas Tech University, University of Alabama, the 2016 PNC University of Kentucky Finance Conference, 2016 Financial Management Association doctoral student consortium, the 2018 Midwest Finance Association conference, the 2018 Eastern Finance Association conference, the 2018 U.S. Securities and Exchange Commission conference, and the 2018 Southern Finance Association conference for helpful comments. We thank Michael McDonald for contributions on an earlier draft. Any errors are ours.

References

Acharya, V., and Xu, Z.. “Financial Dependence and Innovation: The Case of Public versus Private Firms.” Journal of Financial Economics, 124 (2016), 223–243.Google Scholar
Adelino, M.; Schoar, A.; and Severino, F.. “House Prices, Collateral, and Self-Employment.” Journal of Financial Economics, 117 (2015), 288–306.Google Scholar
Atanasov, V. A., and Black, B. S.. “The Trouble with Instruments: Re-Examining Shock-Based IV Designs.” Working Paper, Northwestern University (2017).Google Scholar
Babina, T.; Ouimet, P.; and Zarutskie, R.. “Going Entrepreneurial? IPOs and New Firm Creation.” Working Paper, University of North Carolina (2017).Google Scholar
Barber, B. M., and Lyon, J. D.. “Detecting Long-Run Abnormal Stock Returns: The Empirical Power and Specification of Test Statistics.” Journal of Financial Economics, 43 (1997), 341–372.Google Scholar
Beck, T., and Levine, R.. “Stock Markets, Banks, and Growth: Panel Evidence.” Journal of Banking and Finance, 28 (2004), 423–442.Google Scholar
Bekaert, G.; Harvey, C. R.; and Lundblad, C.. “Does Financial Liberalization Spur Growth?” Journal of Financial Economics, 77 (2005), 3–55.Google Scholar
Bernstein, S.“Does Going Public Affect Innovation?” Journal of Finance, 70 (2015), 1365–1403.Google Scholar
Bernstein, S.; Colonnelli, E.; Giroud, X.; and Iverson, B.. “Bankruptcy Spillovers.” Journal of Financial Economics, forthcoming (2019).Google Scholar
Bertrand, M.; Duflo, E.; and Mullainathan, S.. “How Much Should We Trust Differences-in-Differences Estimates?” Quarterly Journal of Economics, 119 (2004), 249–275.Google Scholar
Blackwell, M.; Iacus, S.; King, G.; and Porro, G.. “cem: Coarsened Exact Matching in Stata.” Stata Journal, 9 (2009), 524–546.Google Scholar
Borisov, A.; Ellul, A.; and Sevilir, M.. “Access to Public Capital Markets and Employment Growth.” Working Paper, University of Cincinnati (2017).Google Scholar
Brown, J. R.; Fazzari, S. M.; and Petersen, B. C.. “Financing Innovation and Growth: Cash Flow, External Equity, and the 1990s R&D Boom.” Journal of Finance, 64 (2009), 151–185.Google Scholar
Brown, J. R., and Floros, I. V.. “Access to Private Equity and Real Firm Activity: Evidence from PIPEs.” Journal of Corporate Finance, 182 (2012), 151–165.Google Scholar
Brown, J. R.; Martinsson, G.; and Petersen, B. C.. “Law, Stock Markets, and Innovation.” Journal of Finance, 68 (2013), 1517–1549.Google Scholar
Busaba, W. Y.; Benveniste, L. M.; and Guo, R.. “The Option to Withdraw IPOs during the Premarket: Empirical Analysis.” Journal of Financial Economics, 60 (2001), 73–102.Google Scholar
Cagetti, M., and De Nardi, M.. “Entrepreneurship, Frictions, and Wealth.” Journal of Political Economy, 114 (2006), 835–870.Google Scholar
Carlino, G., and Coulson, N. E.. “Compensating Differentials and the Social Benefits of the NFL.” Journal of Urban Economics, 56 (2004), 25–50.Google Scholar
Cooney, J. W.; Moeller, T.; and Stegemoller, M.. “The Underpricing of Private Targets.” Journal of Financial Economics, 93 (2009), 51–66.Google Scholar
Cornaggia, J.; Gustafson, M.; Kotter, J. D.; and Pisciotta, K.. “Public Ownership and the Local Economy.” Working Paper, Pennsylvania State University (2018).Google Scholar
Dunbar, C. G., and Foerster, S. R.. “Second Time Lucky? Withdrawn IPOs that Return to the Market.” Journal of Financial Economics, 87 (2008), 610–635.Google Scholar
Gao, X.; Ritter, J. R.; and Zhu, Z.. “Where Have All the IPOs Gone?” Journal of Financial and Quantitative Analysis, 48 (2013), 1663–1692.Google Scholar
Greenstone, M., and Moretti, E.. “Bidding for Industrial Plants: Does Winning a ‘Million Dollar Plant’ Increase Welfare?” Working Paper, National Bureau of Economic Research (2003).Google Scholar
Greenstone, M.; Hornbeck, R.; and Moretti, E.. “Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings.” Journal of Political Economy, 118 (2010), 536–598.Google Scholar
Hahn, J., and Hausman, J.. “Weak Instruments: Diagnosis and Cures in Empirical Econometrics.” American Economic Review, 93 (2003), 118–125.Google Scholar
Haltiwanger, J.; Jarmin, R. S.; and Miranda, J.. “Who Creates Jobs? Small versus Large versus Young.” Review of Economics and Statistics, 95 (2013), 347–361.Google Scholar
Jayaratne, J., and Strahan, P. E.. “The Finance-Growth Nexus: Evidence from Bank Branch Deregulation.” Quarterly Journal of Economics, 111 (1996), 639–670.Google Scholar
Jiang, W.“Have Instrumental Variables Brought Us Closer to the Truth?” Review of Corporate Finance Studies, 6 (2017), 127–140.Google Scholar
Karolyi, G. A.“The Role of American Depositary Receipts in the Development of Emerging Equity Markets.” Review of Economics and Statistics, 86 (2004), 670–690.Google Scholar
Kavetsos, G.“The Impact of the London Olympics Announcement on Property Prices.” Urban Studies, 49 (2012), 1453–1470.Google Scholar
Kenney, M.; Patton, D.; and Ritter, J. R.. “Post-IPO Employment and Revenue Growth for U.S. IPOs, June 1996–2010.” Ewing Marion Kauffman Foundation Report (2012).Google Scholar
Kutsuna, K.; Smith, J. K.; Smith, R.; and Yamada, K.. “Supply-Chain Spillover Effects of IPOs.” Journal of Banking and Finance, 64 (2016), 150–168.Google Scholar
Levine, R.“Finance and Growth: Theory and Evidence.” In Handbook of Economic Growth, Aghion, P. and Durlauf, S., eds. Amsterdam, The Netherlands: Elsevier BV (2005), 865–934.Google Scholar
Mian, A.; Rao, K.; and Sufi, A.. “Household Balance Sheets, Consumption, and the Economic Slump.” Quarterly Journal of Economics, 128 (2013), 1687–1726.Google Scholar
Mian, A., and Sufi, A.. “What Explains the 2007–2009 Drop in Employment?” Econometrica, 82 (2014), 2197–2223.Google Scholar
Morck, R.; Shleifer, A.; Vishny, R. W.; Shapiro, M.; and Poterba, J. M.. “The Stock Market and Investment: Is the Market a Sideshow?” Brookings Papers on Economic Activity, 1990 (1990), 157–215.Google Scholar
Moretti, E.“Local Multipliers.” American Economic Review, 100 (2010), 373–377.Google Scholar
Ritter, J. R., and Welch, I.. “A Review of IPO Activity, Pricing, and Allocations.” Journal of Finance, 57 (2002), 1795–1828.Google Scholar
Schmalz, M. C.; Sraer, D. A.; and Thesmar, D.. “Housing Collateral and Entrepreneurship.” Journal of Finance, 72 (2017), 99–132.Google Scholar
Stock, J. H., and Yogo, M.. “Testing for Weak Instruments in Linear IV Regression.” In Identification and Inference for Econometric Models: Essays in Honor of Thomas Rothenberg, Andrews, D. W. K. and Stock, J. H., eds. Cambridge, UK: University Press (2005), 80–108.Google Scholar
Supplementary material: File

Butler et al. supplementary material

Butler et al. supplementary material 1

Download Butler et al. supplementary material(File)
File 437 KB