‘Going public and the internal organization of the firm’
by Stefan Obernberger
Meeting ID: 683 469 0808
We examine how firms adapt their organization when they go public. IPO firms transform into a more hierarchical organization with an active 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 industry-specific experience than incumbents and employees leaving the firm. Wages and wage inequality increase as IPO firms become more hierarchical and higher ranked employees become more productive. Overall, going public succumbs the firm to a transformation which reduces human capital risk and efficiently organizes the production process of a public firm.