City Research Online

Abstract

We study the relationship between ownership concentration and firm value using hand‐collected data on the stakes of owner‐managers before and after IPOs. We instrument for the reduction in stake using market returns shortly before IPOs. Short‐run market returns are plausible instruments since owners engage in market timing by selling more when prior returns are high, but high short‐run returns are unlikely to directly affect firm value years after the IPO. As predicted by agency theory, a large reduction in ownership concentration at the IPO is negatively related to valuation. Future asset growth is low when owners have low stakes.

Publication Type:	Article
Publisher Keywords:	ownership; firm value; instrumental variables; IPOs
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HG Finance
Departments:	Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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