The Bank of Italy today publishes 'From Public to Internal Capital Markets: The Effects of Affiliated IPOs on Group Firms', the new issue of the series 'Markets, infrastructures, payment systems'.
Using detailed data on corporate ownership for private and public firms, we document the effects of group-affiliated initial public offerings (IPOs) on other unlisted fi rms in the same group. We find evidence of a significant and persistent decrease in leverage (-6 per cent) and of an increase in employment (+18 per cent), with the latter effect being more pronounced for more financially constrained, younger, and smaller firms within the group. By comparing the determinants and the ex-post effects of IPOs on affiliated and stand-alone issuers, we show that affiliated IPOs are less likely to be driven by the investment needs of the issuer. Overall, this evidence is consistent with the hypothesis that relaxing financial constraints and expanding the workforce in group firms are the intended objectives of affiliated IPOs rather than side effects.
