The Impact of IPOs on Innovations : Short-Termism or Initial Governance Force Exit?

We study the impact of initial public offerings (IPOs) on corporate innovations in China. The findings suggest that going public significantly impedes corporate innovations by lowering overall innovation quality. For firms with shareholders selling or pledging less shares after IPO, the number of patents increases but the non-self-citations per patent decrease relative to matched non-IPO firms. In contrast, for firms with shareholders selling or pledging more shares after IPOs, both the number of patents and non-self-citations per patent decrease. The magnitudes of impact in the latter are stronger than those of former, supporting the initial governance force exit hypothesis