IPOs, Employee Reallocation, and New Firm Creation - Tania Babina
Speaker : Tania Babina
Buil. T - Room T104
We examine the effect of a successful initial public offering (IPO) on employee reallocation and new firm creation. After controlling for endogeneity, we document that a successful IPO induces employees to leave for startups, but has no impact on departures to established firms. Cross-sectional results suggest that these findings are driven by a wealth shock mechanism, as employees cash out stock holdings following the IPO. From the perspective of the IPO firm, the loss of entrepreneurial-minded employees is counter-balanced by a significant increase in employment of high-wage workers. These results suggest that public markets are important for the reallocation of valuable human capital to startups.