How Does Going Public Affect Employee Satisfaction? Evidence from Glassdoor Reviews

We examine how initial public offerings (IPOs) influence employees’ satisfaction with their employers. Using millions of company reviews and a generalized difference-in-differences method, we document that employees become less satisfied after their employers go public. The effect is driven by employees who joined the company before the IPO rather than those who joined after it and is stronger for employees whose tasks relate to regulatory compliance, for smaller firms, and firms with Big 4 auditors at the IPO. The effect is weaker for IPO firms in industries with low environmental, social, and governance (especially social) reputation risk. Using the 2012 Jumpstart Our Business Startups Act to explore changes in regulatory burdens associated with an IPO, we find that the adverse effect of an IPO on employee satisfaction is weaker for IPO firms that benefit from reduced regulatory burden. Overall, our findings provide novel insights into how going public can affect employee welfare and one potential mechanism behind this effect. This paper was accepted by Suraj Srinivasan, accounting. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.04285 .