FAMILY FIRM IPO PERFORMANCE AND MARKET SIGNALS

2009 ◽  
Vol 17 (01) ◽  
pp. 55-77 ◽  
Author(s):  
HUNG-BIN DING ◽  
KUNTARA PUKTHUANTHONG-LE
Keyword(s):  
Initial Public Offering ◽  
Family Firms ◽  
Family Firm ◽  
Ipo Performance ◽  
Market Signals ◽  
Long Run ◽  
Public Offering ◽  
Long Term Performance ◽  
Term Performance ◽  
The Impact

Recently, the interests in the performance of family firms in the capital market are on the rise. However studies on long-term performance give us little information about the performance of family firms in the initial public offering (IPO) markets. Building on agency theory, we investigated the effect of three IPO signals in family firm IPOs. Practices such as the appointment of outside non-family directors and waiting longer before going public significantly reduce underpricing. In addition, family owners' intent to retain large percentage of share in the long run is an indication of original shareholders' level of confidence in their own companies. Such confidence helps reduce after market investors' uncertainty and thus underpricing. On the other hand, family ownership at the IPO positively moderates the impact of non-family directors on underpricing.

scholarly journals Family ownership, governance choices and post-ipo performance

2017 ◽  
Vol 14 (4) ◽  
pp. 216-226
Author(s):  
Bharat A. Jain ◽  
Yingying Shao
Keyword(s):  
Initial Public Offering ◽  
Family Firms ◽  
Governance Mechanism ◽  
Investment Performance ◽  
Family Control ◽  
Ipo Performance ◽  
Family Versus ◽  
Long Run ◽  
Public Offering ◽  
Governance Choices

The purpose of this study is to evaluate the extent governance choices at the time of going public differ for family versus non family firms. In addition, the short and long-run performance of family and non-family firms after their initial public offering (IPO) is examined. The results indicate significant differences between family versus non-family firms on governance choices at the time of their IPO related to dual class structures, board composition, board size, and board leadership structure. Additionally, the results suggest that investors assign a lower valuation at IPO to family firms. Further, governance mechanism that strengthen family control differentially influence post-IPO underpricing. Finally, the results suggest that family firms underperform non-family firms in terms of long-run post-IPO investment performance.

Groupon: let's make a deal?

2015 ◽  
Vol 11 (1) ◽  
pp. 26-38
Author(s):  
Susan White
Keyword(s):  
Social Media ◽  
Initial Public Offering ◽  
Content Type ◽  
Media Companies ◽  
Secondary Sources ◽  
Long Run ◽  
Public Offering ◽  
Media Firms ◽  
Term Performance

Synopsis Groupon, an online coupon company, was one of many companies that considered an initial public offering (IPO) during what might be a second technology/internet/social media IPO boom in 2011. Some companies chose to postpone their IPOs, while others took advantage of the media attention focussed on technology companies, and in particular, social media firms. Should investors hop on the tech IPO bandwagon, or hold off to better evaluate the long-term prospects of tech companies, and in particular social media companies? Would the valuation of Groupon justify an investment in IPO shares? Research methodology The case was researched from secondary sources, using Groupon's IPO filing information, news articles about the IPO and industry research sources, such as IBIS World. Relevant courses and levels This case is appropriate for an advanced undergraduate or MBA corporate finance or investment elective. Most introductory finance classes do not have the time to cover later chapters in a finance textbook, where information about IPOs is generally found. It could also be used at the end of a core finance course, where the instructor wanted to introduce this topic through a case study of a hard-to-value internet-based company to illustrate the difficulties in setting IPO prices. The case could also be used in an equity analysis class, an entrepreneurial finance class or an investment class, to spur discussion about valuing an internet company and choosing appropriate investments for pension fund investing. This case could also be used in a strategy class, focussing on the five forces question, and eliminating the valuation question. Theoretical basis There is a great deal of literature about IPOs and their long-term performance. An excellent source is Jay R. Ritter's research, http://bear.warrington.ufl.edu/ritter, which has a longer time period and more data than could be contained in this case. IPO puzzles include persistent undervaluing of IPOs; in other words, the offer price is lower than, and sometimes substantially lower than, the first day close price. A second issue is the generally poorer long-run performance of companies after their IPO when compared to similar firms that did not do an IPO.

ASIAN AMERICAN-FOUNDED VENTURES IN SILICON VALLEY: CHALLENGES, STRATEGIC PARTNERSHIP, AND PERFORMANCE

2010 ◽  
Vol 18 (04) ◽  
pp. 355-375
Author(s):  
DAVID Y. CHOI ◽  
DONG CHEN ◽  
WOO JIN LEE
Keyword(s):  
Initial Public Offering ◽  
Asian American ◽  
Silicon Valley ◽  
Share Price ◽  
Strategic Partnership ◽  
Strategic Partnerships ◽  
Ipo Performance ◽  
And Performance ◽  
Public Offering ◽  
The Impact

This paper examines the performance of Silicon Valley ventures with Asian-American founding teams. We review some challenges faced by these ventures, compare their performance with that of other ventures, and analyze the impact of strategic partnerships on their performance. Our results indicate that firms founded by Asian American entrepreneurs tend to require more time to reach initial public offering (IPO) status than do other ventures in Silicon Valley. Our results further show that, despite needing this extra time, Asian American-founded ventures significantly outperformed their counterparts in 12-month post-IPO share price gain. This superior short-term post-IPO performance suggests that Asian American firms, particularly those that lacked relationships with U.S.-based strategic investors, might have been undervalued prior to and at IPO.

The Effect Of Geographic Dispersion On The Initial And Long-Run IPO Performance

2017 ◽  
Vol 41 (7) ◽  
pp. 869-897 ◽  
Author(s):  
Ozgur Ozdemir
Keyword(s):  
Initial Public Offering ◽  
Abnormal Returns ◽  
Geographic Dispersion ◽  
Ipo Performance ◽  
Geographically Dispersed ◽  
Long Run ◽  
Significant Difference ◽  
Short Run ◽  
Restaurant Firms ◽  
Public Offering

This study examines the effect of geographic dispersion on the short-run and long-run initial public offering (IPO) performance of restaurant firms. Sample of the study consists of 103 restaurant IPOs conducted between 1981 and 2011. The study finds that being geographically dispersed or concentrated in a small area does not lead to a significant difference in the initial returns of restaurant IPOs. Yet the analysis shows that restaurant firms with geographically dispersed operations have significantly higher long-run returns in the post-IPO period compared with their local counterparts. This is evidenced by the significantly larger cumulative abnormal returns for geographically dispersed restaurant firms in the post-IPO period.

Venture Capital Reputation, Post-IPO Performance, and Corporate Governance

2011 ◽  
Vol 46 (5) ◽  
pp. 1295-1333 ◽  
Author(s):  
C. N. V. Krishnan ◽  
Vladimir I. Ivanov ◽  
Ronald W. Masulis ◽  
Ajai K. Singh
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Venture Capital ◽  
Market Share ◽  
Initial Public Offering ◽  
Performance Measures ◽  
Ipo Performance ◽  
The Past ◽  
Long Run ◽  
Public Offering

AbstractWe examine the association of a venture capital (VC) firm’s reputation with the post-initial public offering (IPO) long-run performance of its portfolio firms. We find that VC reputation, measured by the past market share of VC-backed IPOs, has significant positive associations with long-run firm performance measures. While more reputable VCs initially select better-quality firms, more reputable VCs continue to be associated with superior long-run performance, even after controlling for VC selectivity. We find that more reputable VCs exhibit more active post-IPO involvement in the corporate governance of their portfolio firms, and this continued VC involvement positively influences post-IPO firm performance.

IPO underpricing and long-term performance in China: the perspective of price limit policy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yuxin Wang ◽  
Guanying Wang
Keyword(s):  
Initial Public Offering ◽  
Stock Exchange ◽  
Ipo Underpricing ◽  
Content Type ◽  
Price Limit ◽  
Good Policy ◽  
Public Offering ◽  
Long Term Performance ◽  
Term Performance

PurposeThe purpose of this paper is to explore how the price limit policy implemented in 2014 affects initial public offering (IPO) underpricing and long-term performance in China.Design/methodology/approachThe data are the IPOs from Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) between 2004 and 2018. The data are firstly divided into the IPOs before the price limit policy and the IPOs after the price limit policy according to the time of issuance. Then the two groups are divided into 4 subsamples according to the market blocks and the P/E ratio. The authors use multiple regression models to explore the effect of price limit policy in each subsample.FindingsThe first-day price limit system for IPOs is similar to the upward fuse mechanism, the purpose of which is to suppress IPO underpricing. However, this study finds that the policy does not suppress IPO underpricing, but increases the underpricing rate in all subsamples. Besides, the long-term performance in each subsample is different from each other. Main Board stocks’ long-term performance is worse after the policy. The policy makes Small and Medium Enterprise Board (SME Board) and Growth Enterprise Market Board (GEM Board) stocks with high P/E ratios perform better in the long term. For SME Board and GEM Board stocks with low P/E ratios, the policy makes no significant effect.Practical implicationsGood policy intentions may sometimes lead to counterproductive effects. However, since the long-term performance of each subsample is different, it is difficult to judge whether the policy should continue to be implemented or cancelled. Implementing different policies for different subsamples may be a better way to solve this problem.Originality/valueThis paper contributes to the study of IPO underpricing and long-term performance from the perspective of price limit policy.

scholarly journals Impact of family ownership, management, and generations on IPO underpricing and long-run performance

2021 ◽  
Vol 18 (4) ◽  
pp. 266-279
Author(s):  
Lukas Setia-Atmaja ◽  
Yane Chandera
Keyword(s):  
Family Firms ◽  
Negative Relationship ◽  
Family Firm ◽  
Family Ownership ◽  
Agency Conflicts ◽  
Ipo Underpricing ◽  
Controlling Shareholders ◽  
Long Run ◽  
Study Results ◽  
The Impact

This paper examines the impact of family ownership, management, and generations on IPO underpricing and the long-run performance of publicly listed firms in Indonesia from 2004 to 2015. This study is based on agency theory, which discusses the relationship between shareholders and management, as well as controlling and non-controlling shareholders. Study results show that IPO underpricing was 28% higher for family firms than non-family firms. Among family firms, a family member’s presence as a Chief Executive Officer (CEO) significantly reduced the level of IPO underpricing. A negative relationship between family CEO and IPO underpricing was only observed if a CEO at the time of IPO was the founder instead of family descendants. A long-run return of family-firm IPOs was more likely to underperform their non-family-firm counterparts. The findings in the primary market suggest that investors predict bigger issues of agency conflicts between controlling and non-controlling shareholders in family firms than the issues of agency conflicts between shareholders and management in non-family firms. Since investors consider family-firm IPOs to be riskier than non-family firms, they demand a higher level of IPO underpricing to compensate for such risks. The results in the secondary market confirm the findings in the primary market.

Does family involvement foster IPO value? Empirical analysis on Italian stock market

2015 ◽  
Vol 53 (5) ◽  
pp. 1125-1154 ◽  
Author(s):  
Alessandro Cirillo ◽  
Mauro Romano ◽  
Otello Ardovino
Keyword(s):  
Initial Public Offering ◽  
Family Involvement ◽  
Family Firms ◽  
Current Knowledge ◽  
Family Firm ◽  
Data Set ◽  
Content Type ◽  
Family Control ◽  
Long Run ◽  
Italian Context

Purpose – The purpose of this paper is to shed light on the relationship between family involvement and Initial Public Offering (IPO) value in the Italian context. Design/methodology/approach – Based on a unique hand-collected data set, the authors test the hypotheses on companies that went public between 2000 and 2011, making inference on 113 firms using OLS hierarchical regressions. The authors quantify the IPO value from an outside investors’ perspective with two measures to proxy for IPO value in the short-term and apply robustness checks for long-run performance. In a stewardship framework, the authors examine demographic variables including family firm status, family involvement in managerial positions and family generations. Findings – The results suggest that family firm status positively influences IPO value, that greater family involvement corresponds to higher IPO value and lastly, that the beneficial effect of family control is mainly attributable to the first generation. The results are robust to alternative specifications of each phenomenon. Research limitations/implications – As a single-country study, the results refer exclusively to the Italian context and thus the evidence provided may not automatically be generalized to IPOs of comparable equity markets. Originality/value – This study expands current knowledge by showing how investors “price” family ownership in an IPO; furthermore the authors assess how certain characteristics of family firms affect the IPOs (e.g. family involvement and intergenerational).

Earnings Management and IPO Anomalies—Evidence from Indian Stock Market

2021 ◽  
pp. 227853372199471
Author(s):  
Aprajita Pandey ◽  
J. K. Pattanayak
Keyword(s):  
Earnings Management ◽  
Stock Returns ◽  
Initial Public Offering ◽  
Public Offering ◽  
High Level ◽  
Long Term Performance ◽  
Indian Stock Market ◽  
Term Performance ◽  
The Relationship

This study examines the relationship between the extent of earnings management in a firm, the level of underpricing during an initial public offering (IPO), and their long-term performance. Earnings management has been acknowledged as a matter of concern during IPOs since long; however, its relationship with underpricing and long-term returns remained inconclusive in emerging markets like India. Using a sample of Indian IPO firms, this study finds that firms that manage accruals aggressively in the pre-IPO period have high initial returns and subsequently low stock returns in the post-IPO period. This study also observed that firms that have used abnormal accruals more conservatively while reporting earnings have better returns in the third year after IPO compared to the firms that reported more aggressively. The results are in consonance with the theory of information asymmetry and suggest that valuation of an IPO firm becomes ambiguous with high level of earnings management, which leads to higher underpricing.

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