IPOs, Human Capital, and Labor Reallocation

Tania Babina, Paige Ouimet, and Rebecca Zarutskie

♦ How does access to public equity markets affect the human capital of IPO filing firms? While IPO filing firms have high average wages and limited industrial diversification, a successful IPO increases departures of high-wage employees to startups and triggers industrial diversification through employment growth in non-core industries. Surprisingly, IPOs do not significantly affect earnings growth of pre-IPO workers. Instead, post-IPO hires receive larger earnings increases upon joining.  Overall, going public has a significant effect on a firm’s workforce and labor reallocation across firms.

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