Supply-Chain Spillover Effects of IPOs

We test whether there are liquidity-related spillovers of IPOs on supply-chain partners (the IPO spillover hypothesis). We find that private suppliers and customers of IPO firms achieve higher growth rates of revenue, cash, and PP&E than do comparison or matched firms. The transmission mechanism differs between suppliers and customers. For suppliers, the expected negative effect on accounts receivable growth is offset by higher revenue growth. Suppliers also gain enhanced access to loans when important customers go public. For customers, liquidity is transmitted through growth in accounts payable. The results enhance our understanding of trade credit as a liquidity transmission mechanism.