The Effect of Ipos on German Family-Owned Firms: Governance Changes, Ownership Structure, and Performance

Abstract

Empirical evidence is offered about the change in ownership structure following Initial Public Offerings (IPOs) and its impact on the long-term stock performance of family-owned firms in Germany. The data analyzed include 105 IPOs of founding family-owned firms floated between January 1970 and December 1990. The family firms in the sample are at a very late stage in their life cycle (compared to both European and U.S. standards). Also examined is the relationship between voting rights concentration of family stockholders in the first three years after the IPO and the corresponding long-term stock responses in order to asses the potential impact of ownership changes on firm performance. There is a non-linear relationship between the concentration of voting rights and the stock performance of the firm. Ten years after implementation of an IPO, family owners still exercise significant corporate control. (CBS)

Keywords: Ownership structures, Stock performance, Voting rights, Initial public offerings (IPO), Cash flow, Family firms, Finance, Firm governance