Event Details

Accounting and Finance, Finance Research Seminar by Merih Sevilir, Indiana University. Paper title: Going Public and the Internal Organization of the Firm

Abstract

We examine how firms adapt their organization when they go public. IPO firms transform

into a more hierarchical organization with a larger internal labor market. Organizational

functions dedicated to accounting, finance, information and communication, and human

resources become much more prominent. Managerial oversight increases and many employees

are added to the higher ranks of the organization. IPO firms turn around a

large chunk of their labor force and almost their entire management to adapt to the new

organization. New employees are better educated, but they possess less job- and industryspecific

human capital than incumbents and employees leaving the firm. Wage inequality

increases as firms become more hierarchical. Overall, going public succumbs the firm to a

transformation which reduces human capital risk and efficiently organizes the production

process of a public firm.