Role of Private Equity Exit Strategy, Governance Mechanism and Regulatory Constraint on Performance of Indian IPOs

26 Pages Posted: 5 Dec 2010 Last revised: 14 Dec 2010

See all articles by Phani BV

Phani BV

Indian Institute of Technology Kanpur

Kunal

Indian Institute of Management Kashipur

Supriya Katti

Indian Institute of Technology, Kanpur

Date Written: December 2, 2010

Abstract

The performance of Indian initial public offerings (IPO) is influenced by the ownership structure of a firm. As many firms raise the capital in the form of private equity (PE), this work highlights the impact of governance structure of private equity firms, the decision of exit through IPO route on the performance of Indian IPO. In Indian scenario, private equity (PE) backed IPO shows insignificant role in impacting the degree of underpricing of IPO as well as IPO performance. The insignificant ownership stake held by private equity investors as a consequence of regulatory constraint as well as liquidating less ownership stake through IPO is identified as a differentiating characteristic in India. These observed results are contrary to the results reported by Lee & Wahal (2004). On the other hand it supports the grandstanding hypothesis related to private equity firms put forth by Gompers (1996). However, our results show that PE investment in business group affiliated firms’ shows significant negative impact on its long term performance. The overall performance of IPO follows ‘U’ shape curve.

Keywords: Private Equity, IPO, Governance, Regulation

JEL Classification: G12, G20, G23, G28, G32

Suggested Citation

Bollempalli, Venkata Phani and , Kunal and Katti, Supriya, Role of Private Equity Exit Strategy, Governance Mechanism and Regulatory Constraint on Performance of Indian IPOs (December 2, 2010). Available at SSRN: https://ssrn.com/abstract=1718963 or http://dx.doi.org/10.2139/ssrn.1718963

Venkata Phani Bollempalli (Contact Author)

Indian Institute of Technology Kanpur ( email )

IME, IIT Kanpur
Kanpur, Uttar Pradesh 208016
India
+91-512-2597877 (Phone)
+91-512-2597553 (Fax)

HOME PAGE: http://iitk.ac.in/new/b-v-phani

Kunal

Indian Institute of Management Kashipur ( email )

NH 74
Kundsebara, Uttarakhand 244713
India

Supriya Katti

Indian Institute of Technology, Kanpur ( email )

Department of Industrial and Management Engineerin
Kanpur, Uttar Pradesh 208016
India

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