Firm Mortality and Natal Financial Care
2014, forthcoming Journal of Financial and Quantitative Analysis
Utpal Bhattacharya, Alexander Borisov, Xiaoyun Yu
We construct a mortality table for U.S. public companies during 1985-2006. We find that firms’ age-specific mortality rates initially increase, peaking at age three, and then decrease with age, implying that the first three years of public life are critical. Financial intermediaries involved around the public birth of a firm — venture capitalists (VCs) and high-quality underwriters — are associated with lower firm mortality rates, sometimes for up to seven years after the IPO. VCs reduce mortality rates more through natal financial care than through selection, whereas high-quality underwriters affect firm mortality more through selection.
Bhattacharya, Utpal, Alexander Borisov, and Xiaoyun Yu (2014), “Firm Mortality and Natal Financial Care,” Journal of Financial and Quantitative Analysis, forthcoming.