IPO exit risk

The timing and sequencing of innovation, investment, financing and payout decisions

Elizabeth Zhu, Jennifer Gippel, Martina Linnenluecke, Thomas Smith

Research output: Chapter in Book/Report/Conference proceedingConference proceeding contribution

Abstract

Barely one sixth of U.S. initial public offerings (IPO) survive a median listing life of 5.73 years. Prior literature suggests a variety of financial and management variables as explanatory factors for why many IPO are short lived. In addition to these variables, we look at the timing and sequencing of innovation, investment, financing and payout activity for all IPOs listed on NYSE, NYSE MKT and NASDAQ from 1976 onwards and divide the sample into survivors, voluntary delisters (acquired firms) and involuntary delisters. Our findings are twofold: (1) Firms that first innovate and then invest and payout later are more likely to survive, and (2) survivor firms tend to have less collateral, less debt, are smaller, unique, have been around longer and receive analyst coverage earlier. Our study contributes to a better understanding of IPO exit risk, and sheds light on the optimal sequencing of management decisions to minimize IPO exit risk and maximize firm survival in the post-IPO stage.
Original languageEnglish
Title of host publicationAcademy of Management Proceedings
Place of PublicationAnaheim, CA, USA
PublisherAcademy of Management
Number of pages1
Volume2016
Publication statusPublished - 2016

Keywords

  • innovation
  • investment
  • IPO

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