What question did this study set out to answer?

To assess how IPO activities impact the performance of local private SMEs in affected regions.

January 14, 2026

IPO Boom, Neighbour's Gloom: The Hidden Costs of IPOs on Local Private SMEs

Key Points

To assess how IPO activities impact the performance of local private SMEs in affected regions.
Examined IPO suspensions by Chinese regulators
Compared performance of local SMEs in affected vs. unaffected regions
Conducted channel tests to identify resource competition between IPO firms and local SMEs
Local SMEs in affected regions experienced reduced return on assets (ROA)
IPO firms attracted customers, financial capital, and labor from local SMEs
The negative effects were greater for SMEs relying on financial or human capital
Stronger relative power of IPO firms intensified the grabbing effect
Intense local competition exacerbated the situation

Abstract

ABSTRACT Using IPO suspensions unexpectedly adopted by Chinese regulators, we examine the impact of IPO activities on the performance of local private SMEs. SMEs in regions affected by IPO activities experience reduced ROA compared to those in unaffected regions, indicating a grabbing effect of local IPO activities. Channel tests reveal that IPO firms grab customers, financial capital, and labour from local SMEs. This effect is stronger when SMEs rely heavily on financial or human capital, when IPO firms hold stronger relative power, and when competition is intense. Our findings remind regulators of the unexpected negative externalities of local IPO activities.

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