Institutional ownership of dual-class companies

2021 ◽  
Vol 13 (2) ◽  
pp. 206-222
Author(s):  
Jonathan J. Burson ◽  
Marlin R.H. Jensen
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Value Added ◽  
Institutional Ownership ◽  
Voting Rights ◽  
Class Structure ◽  
Content Type ◽  
Public Offerings ◽  
Advantages And Disadvantages ◽  
Dual Class

Purpose This study aims to examine institutional ownership of companies that go public with dual-class share structures. Design/methodology/approach Several recent studies have discussed the potential advantages and disadvantages of the dual-class structure, which allows founders and insiders to maintain control of the firms they created through superior voting rights. Institutional investors oppose the dual-class structure, arguing that inferior voting rights make it difficult to respond to poor governance or performance. Previous research has shown the early value-added to the dual-class firm declines through time. This study examines institutional ownership of dual-class companies through time and compares institutional investments in initial public offerings with perpetual superior-class structures versus those with provisions to sunset those shares to one-share, one-vote structures. Findings Evidence suggests that institutional investors view perpetual dual-class structures as potentially riskier in terms of poor governance or performance and prefer dual-class companies with sunset provisions. Originality/value This study suggests that founders and insiders should consider either the dual-class structure with a sunset provision or if they choose the perpetual dual-class, it should include some type of event-driven safeguards.

The impact of the quality of VC financing and monitoring on the survival of IPO firms

2017 ◽  
Vol 43 (4) ◽  
pp. 440-451 ◽  
Author(s):  
Sophie Pommet
Keyword(s):  
Initial Public Offerings ◽  
Survival Rates ◽  
Venture Capitalist ◽  
Venture Capitalists ◽  
Content Type ◽  
Public Offerings ◽  
Advantages And Disadvantages ◽  
Short Run ◽  
The Impact

Purpose The purpose of this paper is to analyze the impact of venture capital (VC) involvement on the survival rate of French initial public offerings (IPOs) during the period 1996-2006. The paper examines the link between the survival rates of IPO companies, and several proxies for the quality of venture capitalist financing and monitoring. Design/methodology/approach To analyze the impact of the involvement of VC on both long and short run post-IPO survival, two methods are used: survival analysis (the Cox proportional hazard), and a logit model. Findings This paper shows that the quality of venture capitalist monitoring, measured by the duration of their investment before the IPO, is positively correlated with company survival rates. However, the author does not find the expected result when the author considers the experience of venture capitalists measured by their age. Research limitations/implications The findings are limited to a sample of VC-backed companies that went public. Practical implications The findings have implications for entrepreneurs. When analyzing the advantages and disadvantages linked to the presence of VC firms in the capital of their companies, entrepreneurs should consider that certain types of venture capitalists might be more or less able to be involved in the monitoring and value adding process. Originality/value To date, there is no comprehensive study on the French IPO market analyzing both long and short run post-IPO survival of VC-backed companies. This paper fills this gap.

scholarly journals The determinants of involuntary delisting rate in the Egyptian IPO equity market

2014 ◽  
Vol 13 (2) ◽  
pp. 171-190 ◽  
Author(s):  
Esam-Aldin M. Algebaly ◽  
Yusnidah Ibrahim ◽  
Nurwati A. Ahmad-Zaluki
Keyword(s):  
Initial Public Offerings ◽  
Institutional Ownership ◽  
Total Sample ◽  
Operating Efficiency ◽  
Regression Equations ◽  
Content Type ◽  
Public Offerings ◽  
Logit Regression ◽  
The Status ◽  
New Variables

Purpose – The purpose of this paper is to examine the determinants of involuntary delisting rate for the Egyptian initial public offerings (IPOs) issued over the period 1992-2009. Design/methodology/approach – A definition of survival time that considers the date when the new Egyptian listing rules were enforced to track delisting status for each IPO firm for five survival years is relied on. Binary logit regression analysis is used to identify these determinants. Total sample is divided into two subsamples: the first subsample covers the period from 1992 to 2004. It is used to estimate the logit equations and to predict delisting status of firms included in the second subsample, which covers the period from 2005 to 2009. Findings – The probability of involuntary delisting decreases significantly with the increase in firm size, institutional ownership, assets growth rate, operating efficiency, offering size, initial returns and insider ownership. However, it increases significantly in IPO firms with high financial leverage. Based on the estimated logit regression equations, the status of the six firms included in the second subsample are correctly predicted. Practical implications – The results provide several implications for investors, issuing firms and setters of listing rules. Originality/value – This study uses new variables, such as firm type, institutional ownership and listing variables. In addition, several theories are tested and supported.

Do institutional investors stabilize stock returns? Evidence from emerging IPO markets

2020 ◽  
Vol 32 (4) ◽  
pp. 585-600
Author(s):  
Konpanas Dumrongwong
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Stock Return ◽  
Emerging Market ◽  
Institutional Ownership ◽  
Growth Potential ◽  
Return Volatility ◽  
Content Type ◽  
Stock Return Volatility ◽  
The Relationship

Purpose The purpose of this paper is to investigate how institutional ownership is related to the stock return volatility of initial public offerings (IPOs) in an emerging market and to examine the relationship between institutional ownership and underpricing. Design/methodology/approach This paper investigates these relationships using White’s (1980) regression and 2 × 3 portfolios sorted by firm size and institutional holdings. The regression method examines the relationships across firms with different characteristics such as size, stock price, growth potential, firm age and type of investors. The data were chosen for this sample to cover the new equity issuances listed on the Thailand Stock Exchange for the period 2001–2019. Findings The empirical results suggest that institutional ownership is negatively associated with initial stock return volatility. This highlights the importance of institutional investors in maintaining stability in emerging stock markets. Additionally, it was found that institutional holding and underpricing are negatively correlated. The results are robust after controlling for potential heteroskedasticity and differences in firm characteristics. Originality/value To the best knowledge of the author, this paper is the first to study the relationship between institutional investors and volatility in Thai IPOs, and hence provides a deeper understanding of how investors influence the price formation and volatility of stock prices in emerging markets. Furthermore, besides academics, the results presented in this paper could be useful for market regulators and policymakers in designing future market regulations to efficiently stabilize equity markets.

Allocation discretion, price discounts and returns in Turkish initial public offerings

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lokman Tutuncu
Keyword(s):  
Least Squares ◽  
Initial Public Offerings ◽  
Institutional Investors ◽  
Ordinary Least Squares ◽  
Foreign Investors ◽  
Content Type ◽  
Public Offerings ◽  
Price Discounts ◽  
Retail Investors ◽  
Research Period

Purpose This study aims to investigate whether underwriters exercise their allocation discretion to offer favorable discounts to institutional investors. Design/methodology/approach The research covers 173 offerings at Borsa Istanbul between 2010 and September 2021. Two hypotheses related to allocation discretion are developed and tested by means of probit, ordinary least squares and two-stage least squares regressions. Heckman selection regressions are used for robustness tests. Findings Allocation discretion is catered toward institutional investors who account for more than 56% of all initial allocations adjusted by gross proceeds. Close to 84% of all gross proceeds come from offerings that allocation discretion is exercised. These discretionary offerings are sold with larger price discounts, yet provide lower initial returns, while evidence points to reallocation to retail investors due to weak demand from institutional investors. Research limitations/implications Despite using the population of firms in the research period, the sample size is small relative to more developed markets. The research period cannot be extended because allocation discretion is allowed in 2010. Practical implications The research highlights the importance of institutional and foreign investors to the equity markets. This issue is relevant due to the ongoing flight of foreign investors from emerging economies and the increasing participation of small investors in the stock markets. Social implications The study cautions retail investors against greater (re)allocations by underwriters who may seek to compensate for the loss of their foreign investor base and urges policymakers to regain foreign investors. Originality/value To the best of the authors’ knowledge, this is the first research paper to use actual discounts disclosed in the prospectus to test the predictions related to allocation discretion. The study also contributes to the emerging markets literature by documenting allocation practices of the Turkish underwriters for the first time.

scholarly journals Board structure and institutional ownership at the time of IPO

2017 ◽  
Vol 43 (9) ◽  
pp. 950-965 ◽  
Author(s):  
Suman Neupane ◽  
Biwesh Neupane
Keyword(s):  
Institutional Investors ◽  
Critical Time ◽  
Institutional Ownership ◽  
Board Independence ◽  
Board Structure ◽  
Data Set ◽  
Content Type ◽  
Institutional Holdings ◽  
Foreign Institutional Investors ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of mandatory regulatory provisions on board structure and the influence of such board structure on institutional holdings. Design/methodology/approach The study uses unique hand-collected data set of Indian IPOs during the 2004-2012 period after the corporate governance reforms with the introduction of clause 49 in the listing agreements in 2001. Using OLS regression, the paper empirically analyses the determinants of board size and board independence at the time of the IPOs and the influence of such a board structure on shareholdings by domestic and foreign institutional investors. Findings The authors find that complying with mandatory regulatory provisions does not impede firms from structuring their boards to reflect the firms’ advising and monitoring needs. The authors also find that complying with provisions have positive implication for the firm, as firms with greater board independence appear to attract more foreign institutional investors. Originality/value To the authors’ best knowledge, this is the first study to examine the issue in a regime where regulation mandates the composition of the board of directors. The paper also extends the literature on institutional holdings by providing evidence on the impact of board structure on institutional ownership at a critical time in a firm’s life cycle when concerns for endogeneity for empirical investigations are weaker.

IPO valuation using the price-multiple methods: evidence from Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chui Zi Ong ◽  
Rasidah Mohd-Rashid ◽  
Kamarun Nisham Taufil-Mohd
Keyword(s):  
Initial Public Offerings ◽  
Stock Exchange ◽  
Least Square ◽  
Multiple Methods ◽  
Cross Sectional ◽  
Ols Regression ◽  
Content Type ◽  
Public Offerings ◽  
Ordinary Least Square ◽  
Valuation Method

Purpose This study aims to investigate the valuation accuracy of Malaysian initial public offerings (IPOs) by using price-multiple methods. Design/methodology/approach Cross-sectional data including 467 IPOs listed on the Malaysian stock exchange were used for the period of 2000–2017. This study used univariate ordinary least square (OLS) regression to analyse the relationship between IPOs’ price-multiples and comparable firms’ price-multiples. The test of valuation accuracy was conducted via computing valuation errors by segregating the sample into two groups: fixed-price IPOs and book-built IPOs. Furthermore, multiple OLS regression was used to examine the influence of IPO valuation on underpricing. Findings The findings of the results suggested that IPOs price-to-earnings (P/E), price-to-book (P/B) and price-to-sales (P/S) multiples were positively related to the median P/E, P/B and P/S multiples of five comparable firms matched by industry and revenues. The P/S multiple was shown to be the most significant valuation method, specifically in book-built IPOs. The findings indicated that those firms that had a lower valuation in comparison to the comparable firms were inclined to underprice their IPOs to allure investors to subscribe IPOs. In addition, book-built IPOs that had fair valuations were inclined to generate higher initial returns for investors. Practical implications The findings of this study observed implications for underwriters in avoiding the mis-valuation issue by considering the book-building mechanism. Originality/value This study attempted to explore the suitability of the valuation method to value IPOs in Malaysia.

Does Sentiment Drive the Retail Demand for IPOs?

2009 ◽  
Vol 44 (1) ◽  
pp. 85-108 ◽  
Author(s):  
Daniel Dorn
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Equity Offerings ◽  
Public Offerings ◽  
Trading Decisions ◽  
Retail Trading ◽  
Public Equity ◽  
Retail Demand ◽  
As If

AbstractIndividual and institutional investors can trade German initial public equity offerings on an as-if/when-issued basis before the start of secondary trading. Using actual when-issued trades made by a sample of clients at a large German retail broker during 1999 and 2000, the paper documents that retail buyers consistently overpay for initial public offerings (IPOs) in the when-issued market relative to the immediate aftermarket. The observed willingness to overpay points to sentiment as a driver of retail trading decisions. Consistent with this interpretation and with sentiment affecting prices, IPOs that are aggressively bought by individuals in the when-issued market exhibit high first-day returns as well as poor aftermarket returns relative to benchmarks of similar stocks.

The control-ownership wedge and the survival of French IPOs

2018 ◽  
Vol 19 (2) ◽  
pp. 271-294 ◽  
Author(s):  
Imen Derouiche ◽  
Syrine Sassi ◽  
Narjess Toumi
Keyword(s):  
Survival Time ◽  
Initial Public Offerings ◽  
Failure Time ◽  
Vote Rule ◽  
Agency Conflicts ◽  
Content Type ◽  
Controlling Shareholders ◽  
Public Offerings ◽  
The One

Purpose The purpose of this paper is to investigate the effect of the control-ownership wedge of controlling shareholders (excess control) on the survival of French initial public offerings (IPOs). Design/methodology/approach This paper studies a large sample of 434 French IPOs. The empirical analysis uses the Cox proportional hazard and accelerated-failure-time models. Data are manually gathered from IPO prospectuses. Findings The findings support a positive relation between the control-ownership wedge and IPO survival time, indicating that survival is more likely in firms with high excess control levels. This result is consistent with the view that controlling shareholders with a large control-ownership wedge have incentives to preserve their private benefits of control by increasing firm survival chances. The findings also show that older IPOs are more likely to survive, while riskier and underpriced IPOs are more likely to delist. Practical implications The results provide a better understanding of the role of excess control in IPO survival. They also enrich the debate on the efficiency of the one-share-one-vote rule. Originality/value The research provides new insights into the role of agency conflicts in IPO survivability. In particular, it explores the effect of dominant shareholders with a control-ownership wedge on survival time.

Subsidiary ownership decisions by bank holding companies

2019 ◽  
Vol 12 (3) ◽  
pp. 425-444
Author(s):  
Wenling Lu ◽  
Wan-Jiun Paul Chiou
Keyword(s):  
Institutional Investors ◽  
Fixed Effects ◽  
Institutional Ownership ◽  
Bank Holding Companies ◽  
Best Interest ◽  
Content Type ◽  
Holding Companies ◽  
Short Period ◽  
The Usa ◽  
The Impact

Purpose This study aims to examine the intertemporal changes in the institutional ownership of publicly traded bank holding companies (BHCs) in the USA. The role of owned-subsidiary investing in the portfolio decisions is investigated as compared to unaffiliated banks and non-bank institutional investors. Design/methodology/approach The authors apply panel regressions that control bank-fixed and time-fixed effects to study the impact of prudence, liquidity, information advantages and historical returns on each type of the institutional ownership from 1986 to 2014. Findings The subsidiary banks tend to invest in more shares of their parent BHCs when they are traded for a short period of time and when they have low-market risk, low turnover, a low capital equity ratio and great reliance on off-balance activities. However, the impact of these determinants of institutional ownership is opposite for unaffiliated banks and non-bank institutions. Research limitations/implications This study provides evidence that the criteria used by subsidiary banks to invest in their parent company stock are different than the unaffiliated banks and non-bank institutions, raising concerns about the owned-subsidiary investing activities and banks’ trustees’ duty to work in the best interest of their trust clients. Originality/value This paper provides a comprehensive analysis of the level and market value of BHC institutional ownership over the past three decades and the impact of different determinants on the ownership of BHCs by subsidiary banks, unaffiliated banks and non-bank institutional investors.

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