Date: 22 October 2021, Friday
‘Why do firms with recent initial public offerings end up delisting?
Role of acquisitions and capital investments’
Kent State University
One of the strategic concerns for newly public firms is to balance its internal investments and mergers and acquisitions (M&As) in the immediate aftermath of an initial public offering. We theorize that both capital investments and acquisitions impact survival (or hazard of delisting) as public firms, and empirically investigate whether these corporate development activities extend or shorten the survival of public firms differently under internal (reorganization) and external turbulence (demand uncertainty). Using a multi-industry sample of 4,350 US firms that held an IPO during 1988–2000 and tracking their post-IPO corporate development activities until they delist or 2012, we find that pursuing capital investments and acquisitions independently but together decreases the hazard of delisting compared to firms with no or specialized corporate development activities. While both internal and external turbulence increases hazard of delisting, pursuing capital investments mitigates the negative effect of high demand uncertainty yet acquisitions have no effect. Increased hazard of delisting due to voluntary reorganization is dampened for firms pursuing M&As but amplified for firms that pursue capital investments.