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Firm Mortality and Natal Financial Care

Published online by Cambridge University Press:  08 June 2015

Utpal Bhattacharya ,
Alexander Borisov  and
Xiaoyun Yu
Utpal Bhattacharya*
Affiliation:
ubhattac@ust.hk, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong
Alexander Borisov
Affiliation:
alexander.borisov@uc.edu, University of Cincinnati, Lindner College of Business, Cincinnati, OH 45221
Xiaoyun Yu
Affiliation:
xiyu@indiana.edu, Indiana University, Kelley School of Business, Bloomington, IN 47405, and Shanghai Jiao Tong University.
*
*Corresponding author: ubhattac@ust.hk
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Abstract

We construct a mortality table for U.S. public companies during 1985–2006. We find that the age-specific mortality rates of firms initially increase, peaking at age three, and then decrease with age, implying that the first 3 years of public life are critical. Financial intermediaries involved around the “public birth” of a firm (e.g., venture capitalists (VCs) and high-quality underwriters) are associated with lower firm mortality rates, sometimes for up to 7 years after the initial public offering (IPO). VCs reduce mortality rates more through natal financial care than through selection, whereas high-quality underwriters affect firm mortality more through selection.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 50 , Issue 1-2 , April 2015 , pp. 61 - 88
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2015 

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