Long-Term Performance Puzzle: High Growth IPO Firms and the Moderating Role of Post-IPO Strategies

Although earlier work suggested that IPO firms underperform in the long run, recent findings show that such performance diverges significantly. Building upon expectancy violation theory, we develop a conceptual framework that explains how the distinction between high growth and non-high-growth firms at IPO is important for understanding the long-term IPO performance. We also explain how post-IPO strategies (acquisition intensity and scaling) shape this relationship. A sample of 559 US IPOs during 2001-2015 supports our hypotheses that while the long-term IPO performances of high growth firms are lower than non-high growth firms, post-IPO acquisition intensity and scaling change this relationship.