The Impact of Initial Public Offerings on Firms’ Performance: Disentangling Treatment from Self-Selection Effects

Using a unique sample of privately held and firms that went public on the European and Asian Stock Exchanges between 2007 and 2011, we investigate the IPO’s impact on the firms’ performance after correcting for endogenous selection and by disentangling equity issues effects from other effects. We find that companies that are going public are more profitable than their matched private firms, while they experience a decrease in profitability over the post-IPO period. These results are resilient to different empirical strategies that address selection bias. Second, after disentangling equity issues effects from other effects, we observe a continuous decline in firms’ profitability in each individual year following the IPO year. JEL classification numbers: G10, G30, G32, L25. Keywords: IPOs, Private firms, Profitability, Selection bias.