Disproportional Ownership Structure and IPO Long-Run Performance of Entrepreneurial Firm in China

47 Pages Posted: 19 Dec 2013

See all articles by Jerry Cao

Jerry Cao

Independent

Gary Gang Tian

Macquarie University - Department of Applied Finance and Actuarial Studies; Macquarie University, Macquarie Business School

Vincent Tang

University of Wollongong

Xiaoming Wang

Shanghai University of Finance and Economics

Date Written: December 10, 2013

Abstract

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

Suggested Citation

Cao, Jerry and Tian, Gary Gang and Tang, Vincent and Wang, Xiaoming, Disproportional Ownership Structure and IPO Long-Run Performance of Entrepreneurial Firm in China (December 10, 2013). Available at SSRN: https://ssrn.com/abstract=2369024 or http://dx.doi.org/10.2139/ssrn.2369024

Jerry Cao (Contact Author)

Independent

No Address Available

Gary Gang Tian

Macquarie University - Department of Applied Finance and Actuarial Studies ( email )

Room 513, Building E4A
North Ryde, NSW, 2109
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Vincent Tang

University of Wollongong

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Xiaoming Wang

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Register to save articles to
your library

Register

Paper statistics

Downloads
99
Abstract Views
1,025
rank
271,254
PlumX Metrics