Disproportional Ownership Structure and IPO Long-Run Performance of Entrepreneurial Firm in China
47 Pages Posted: 19 Dec 2013
Date Written: December 10, 2013
This paper examines the relationship between ownership structures and IPO long-run performance in China. Although entrepreneurial firms underperform the market in general after IPO but the poor performance is mainly caused by the IPOs with ownership control wedge. Entrepreneurial firms with one share one vote structure outperform those with ownership control wedge by 30% for 3 years post-IPO in either buy-and-hold or cumulative monthly returns. Entrepreneurial firms with excess ownership control wedge have higher frequency of undertaking value-destroying related party transactions. These findings suggest that entrepreneurial firms need to improve corporate governance such as disproportional ownership structure to better safeguard the interest of long-run shareholders.
Keywords: IPO, Long-run performance, Excess control, Disproportionate ownership, Corporate governance, Entrepreneurial firms
JEL Classification: G30, G32
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