The Evolution of Corporate Ownership After IPO: The Impact of Investor Protection

46 Pages Posted: 4 Oct 2007 Last revised: 22 Jan 2009

See all articles by C. Fritz Foley

C. Fritz Foley

Harvard University - Business School (HBS); National Bureau of Economic Research (NBER)

Robin M. Greenwood

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 25, 2008

Abstract

Recent research documents that ownership concentration is higher in countries with weak investor protection. However, drawing on panel data on corporate ownership in 34 countries between 1995 and 2006, we show this pattern does not hold for newly public firms, which tend to have concentrated ownership regardless of the level of investor protection. We show that firms in countries with strong investor protection are more likely to experience decreases in ownership concentration after listing, that these decreases appear in response to growth opportunities, and that they are associated with new share issuance. We consider the implications of these findings for financing choices and patterns in firm growth and analyze alternative explanations for the diffusion of ownership that could distort our interpretations. We conclude that ownership concentration falls as firms age following their IPO in countries with strong investor protection because firms in these countries raise capital and grow, diluting blockholders in the process.

Keywords: Ownership, Blockholding, Liquidity, Float, Shareholder Rights, Investor Protection

JEL Classification: G3, G15, G32, G38

Suggested Citation

Foley, C. Fritz and Greenwood, Robin M., The Evolution of Corporate Ownership After IPO: The Impact of Investor Protection (November 25, 2008). Available at SSRN: https://ssrn.com/abstract=1018362 or http://dx.doi.org/10.2139/ssrn.1018362

C. Fritz Foley

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
617-495-6375 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Robin M. Greenwood (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6979 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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