Ramin P. Baghai | Rui C. Silva | Margarida Soares

The Impact of IPOs on Workers

Oct 16, 2025

Key Takeaways

  • Research Question: How do IPOs affect workers’ wages, income stability, household finances, and family decisions?
  • Data & Method: The authors track 18,813 workers across 153 Swedish firms that filed for IPOs between 1998 and 2011. They identify causal effects by comparing firms that completed their IPOs with those that withdrew, and use stock market returns during IPO book-building as an instrument for IPO completion.
  • Findings:
    • IPO completion increases wages by around 15% and reduces wage volatility by up to 20%, especially for long-tenured and higher-paid employees.
    • After the IPO, workers increase the risky share in their personal investment portfolios and borrow more, suggesting greater financial risk-taking.
    • Homeownership rises significantly, including both primary residences and holiday homes.
    • Marriage, parenthood, and parental leave uptake also increase post-IPO.
  • Implications: IPOs affect workers in economically meaningful and persistent ways, shaping not only earnings trajectories but broader household decisions.

Source Publication: Baghai, R., Silva, R., & Soares, M. (2025). The Impact of IPOs on Workers. SSRN Working Paper.

IPOs: More than Corporate Milestones

Initial public offerings (IPOs) mark a defining transformation for firms: new ownership structures, regulatory scrutiny, and access to capital. Although the literature has widely documented the corporate effects of IPOs, surprisingly little is known about how going public affects employees. This study examines how IPOs reshape workers’ economic well-being and personal lives.

Causal Insights from Swedish Employer–Employee Data

The authors use a comprehensive dataset linking 18,813 employees to 153 firms that filed for IPOs between 1998 and 2011 in Sweden. Crucially, 43 of these firms withdrew their IPO plans, enabling a natural comparison group. This withdrawal introduces a quasi-experimental setting: workers at firms that withdrew their IPO serve as a counterfactual for those at firms that went public.

To strengthen causal identification, the authors further instrument IPO completion with stock market returns during the IPO book-building phase, a source of variation outside the control of individual firms.

How IPOs Transform Workers’ Lives

#1 Wages and Stability
Post-IPO, workers see wage hikes between 10% and 19%. Further, wage volatility falls by about 19%, signaling greater income predictability. This effect is strongest for employees who have been with the firm longest and those earning above median wages pre-IPO—highlighting firms’ ability to repay “deferred” implicit contracts once financial constraints ease.

 

#2 Financial Portfolios and Debt
With newfound financial stability, workers embrace more risk in their personal investment portfolios: equity holdings rise by 11 percentage points, and household debt jumps by 68%. This increased borrowing likely funds home purchases and investments, reflecting elevated confidence and access to credit.

 

#3 Housing and Family Formation
Homeownership rates climb: ownership of primary residences increases by 14 percentage points, while ownership of holiday homes increases by 6 percentage points. IPO-driven financial security also encourages family milestones: the likelihood of marriage increases by 2 percentage points, while the likelihood of parenthood increases by 4 percentage points. Additionally, parental-leave uptake increases, reflecting greater work-life balance or family demands.

 

Broader Implications: IPOs as Socioeconomic Catalysts

These findings suggest IPOs are not just financial milestones but also serve as catalysts of broader societal change. The ability of public firms to stabilize wages and honor implicit contracts helps workers build wealth and invest in family life.

 

From a policy perspective, facilitating public market access may have implications beyond firm-level growth, potentially supporting household financial resilience, social stability, and demographic vitality. This perspective suggests labor outcomes could play a role in discussions of IPO policy.

Shopping Basket