Ownership structure and performance: Evidence from the public float in IPOs

Allen Michel, Jacob Oded*, Israel Shaked

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


We investigate whether the post-IPO market performance of IPO stocks is related to the percentage of shares issued to the public, namely, the public float. We demonstrate that a non-linear relation exists between the public float and post-IPO returns. Specifically, as public float increases, long-run returns decrease for low levels of public float and increase for high levels of public float. This relation persists even after controlling for various firm characteristics. The best long-term performers are firms that sell either very little or sell most of their stock in the IPO. We suggest that the choice of public float level creates a trade-off between incentives to insiders and power granted to outsiders. This trade-off determines the non-linear relation found between the public float and long-run returns.

Original languageEnglish
Pages (from-to)54-61
Number of pages8
JournalJournal of Banking and Finance
Issue number1
StatePublished - Mar 2014


  • Agency problems
  • Equity issuance
  • IPO
  • Ownership structure
  • Public float


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