Abstract: Sacrificing profit to size expansion and market share is a mainstream growth strategy of entrepreneurial firms, but the question whether it can indeed lead to expected growth remains unsolved. With firms getting listed during 2000~2010 in Shanghai and Shenzhen stock markets, this study investigates the influence of two different growth strategies in early post-IPO period on firms′ long-term growth. The results show that nearly half firms have “burned money”, sacrificing profit to size expansion during the first two years after IPO, but their long-term growth of asset, revenue and market value are all lower than those firms that pay more attention to profit. Further results from case study suggest that, the firms that pay more attention to profit concentrate investments on the existing primary businesses that can go soon into operation and earnings, which is helpful for future operation and refinancing, bringing fast growth without fierce fluctuations; on the contrary, those “burning money” firms invest intensively in new areas, which leads to market risks accumulating with long project cycles, making these firms earn less than expectations, besides, their original businesses will shrink or take a loss due to under-investment, further forcing them to refinance. Despite a few of them can finally gain constant refinancing, most are indeed constrained by the refinancing barrier. Therefore, “burning money” strategy will disperse firm growth rate. To sum up, the current “burning money” expansion is not a general and effective growth strategy..

Key words: firm growth, Post-IPO Investment, size expansion, profit loss