Family Firms Going Public: The Impact of Governance and Legitimacy on IPO Performances

Journal of Business Economics and Management 2013, 14(1), 156-181.

Posted: 31 Oct 2009 Last revised: 21 Sep 2014

See all articles by Hung-Bin Ding

Hung-Bin Ding

Loyola University Maryland

Kuntara Pukthuanthong

University of Missouri, Columbia

Date Written: 2013

Abstract

Recently, the interests in the performance of family firms in the capital market are on the rise. However studies on long-term performance give us little information about the performance of family firms in the initial public offering (IPO) markets. Building on agency theory, we investigated the effect of three IPO signals in family firm IPOs. Practices such as the appointment of outside non-family directors and waiting longer before going public significantly reduce underpricing. In addition, family owners' intent to retain large percentage of share in the long run is an indication of original shareholders' level of confidence in their own companies. Such confidence helps reduce after market investors' uncertainty and thus underpricing. On the other hand, family ownership at the IPO positively moderates the impact of non-family directors on underpricing.

Keywords: Family business, IPO, Taiwan, IPO signals, control premium

Suggested Citation

Ding, Hung-Bin and Pukthuanthong, Kuntara, Family Firms Going Public: The Impact of Governance and Legitimacy on IPO Performances (2013). Journal of Business Economics and Management 2013, 14(1), 156-181., Available at SSRN: https://ssrn.com/abstract=1496268

Hung-Bin Ding (Contact Author)

Loyola University Maryland ( email )

4501 N Charles St
Baltimore, MD 21210
United States

Kuntara Pukthuanthong

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: https://www.kuntara.net/

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