Can a Firm’s Life Cycle Stage at the Time of the IPO Predict the Firm’s Ending? Evidence from the IPO Class of 1995
Van Dalsem, Shane
Washburn University. School of Business
Kaw Valley Bank
I examine the relationship between firms' life cycle stages at the time of their IPOs and firm endings during the following twenty-five years by examining the outcomes of 502 firms listed in the Loughran and Ritter (2004) database as having IPOs in 1995. Using Dickinson's (2011) life cycle designations, logistic regression, and Cox proportional hazards models, I find that firms that have their IPOs during their Introduction stage have a 209% greater likelihood of having a negative ending than firms that have their IPOs during a different stage and a 93% greater likelihood of ending through a negative event instead of a merger or acquisition during the study period. The results support the idea that firms which have their IPOs during their Introduction stage may do so to, at least temporarily, make up for a lack of managerial skill.