Insider Retention and Long-Run Performance in German and UK Ipos

Abstract

This paper is about ownership retention in German and UK IPOs, the determinants of ownership retention and its impact on IPO long-term performance. The first part of the paper studies ownership retention by pre-IPO shareholders over a period of six years following the flotation. Second, ownership retention six years after the flotation is linked to four factors, total risk, growth rate of assets, involvement of the founder, and the existence of non-voting shares. Third, the bad long-run performance of IPOs is correlated with ownership retention. The overall evidence suggests that the bad long-term performance of IPOs, compared to the stock market as a whole, cannot be explained by agency conflicts caused by the reduction in ownership by the original shareholders.

JEL Classification: G32, G34