Does Public Ownership and Accountability Increase Diversity? Evidence from IPOs

Rembrand  Koning; John-Paul  Ferguson

Working Paper | HBS Working Paper Series | 2019

Does Public Ownership and Accountability Increase Diversity? Evidence from IPOs

by Rembrand Koning and John-Paul Ferguson

Abstract

Does public ownership improve employment diversity? Organizational researchers theorize that increased transparency to regulators and the public should lead firms to conform to legal and social norms—but that social closure and decoupling should preserve the status quo. Empirical research has been difficult because we lack data on comparable private firms and because firms likely self-select into going public. We construct a new, nationally representative dataset that links firms' filings for initial public offerings to longitudinal data on employment composition from the Equal Employment Opportunity Commission. We construct a set of comparable firms by looking at companies that filed and then withdrew a plan for an IPO. To account for selection bias in withdrawal and IPO success, we instrument the transition to public ownership using market returns in the book-building phase of the firms' IPO attempts. We find no evidence that moving from private to public ownership increases the representation of women or nonwhite workers or managers. We discuss the implications of this finding for our ability to generalize findings in organizational research.

Keywords: IPO; Initial Public Offering; Employees; Diversity; Gender; Race; Entrepreneurship; United States;

Language: English

Format: Print

36 pages

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Citation:

Koning, Rembrand, and John-Paul Ferguson. "Does Public Ownership and Accountability Increase Diversity? Evidence from IPOs." Harvard Business School Working Paper, No. 19-071, January 2019.

Why do some entrepreneurs thrive while others fail? We explore whether the advice entrepreneurs receive about managing their employees influences their startup's performance. We conducted a randomized field experiment in India with 100 high-growth technology firms whose founders received in-person advice from other entrepreneurs who varied in their managerial style. We find that entrepreneurs who received advice from peers with a formal approach to managing people—instituting regular meetings, setting goals consistently, and providing frequent feedback to employees—grew 28% larger and were 10 percentage points less likely to fail than those who got advice from peers with an informal approach to managing people, two years after our intervention. Entrepreneurs with MBAs or accelerator experience did not respond to this intervention, suggesting that formal training can limit the spread of peer advice.

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Does Public Ownership and Accountability Increase Diversity? Evidence from IPOs

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