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Firm Mortality and Natal Financial Care

  • Utpal Bhattacharya (a1), Alexander Borisov (a2) and Xiaoyun Yu (a3)

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.

Copyright

Corresponding author

*Corresponding author: ubhattac@ust.hk

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  • ISSN: 0022-1090
  • EISSN: 1756-6916
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