Control Considerations of Newly Public Firms: The Implementation of Antitakeover Provisions and Dual Class Shares Before the IPO
52 Pages Posted: 22 Feb 1999
Date Written: February 10, 1999
This paper examines the security design of a large sample of U.S. firms issuing initial public offerings (IPOs) and provides evidence on control considerations for these firms. I find that 47% of firms implementing IPOs include antitakeover provisions or bylaws in their corporate charters, while more than 5% go public with multiple classes of stock outstanding. In support of the theoretical findings of Grossman and Hart (1988), I find evidence consistent with private benefits for incumbents of IPO firms implementing multiple class structures. Evidence is also presented that IPO firms implementing antitakeover provisions are of higher quality than those not implementing provisions and that IPO firms implementing antitakeover provisions are less likely to be subsequently acquired.
JEL Classification: G32, G34
Suggested Citation: Suggested Citation