TY - JOUR
T1 - Ownership structure and performance
T2 - Evidence from the public float in IPOs
AU - Michel, Allen
AU - Oded, Jacob
AU - Shaked, Israel
N1 - Funding Information:
We thank the anonymous referee and the editor, Ike Mathur, for helpful comments and suggestions. We are also grateful to Ulf Nielsson, Jin Sun, as well as participants at the Eastern Finance Association Meetings 2012, the World Finance Association Meetings in Cyprus 2013. We thank Dan Negovan for excellent research assistance. Financial support from Back Bay Management is gratefully acknowledged. Jacob Oded is also grateful for financial support from the Henry Crown Institute of Business Research.
PY - 2014/3
Y1 - 2014/3
N2 - 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.
AB - 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.
KW - Agency problems
KW - Equity issuance
KW - IPO
KW - Ownership structure
KW - Public float
UR - http://www.scopus.com/inward/record.url?scp=84890843996&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2013.11.018
DO - 10.1016/j.jbankfin.2013.11.018
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AN - SCOPUS:84890843996
SN - 0378-4266
VL - 40
SP - 54
EP - 61
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 1
ER -