IPO impact on industry incumbents

The creation of an innovative company is suggestive of change in an industry. To test that change this paper tests the impact of IPOs on industry incumbents. IPOs are found to happen in industries that exhibited positive abnormal returns for up to 5 years before the IPO date. The IPO date is found to coincide with the end of that industry abnormal return profile. This paper suggests this evidence is consistent with the IPO acting as mechanism of enforcing market efficiency at the industry level