Legitimacy Signals and Family IPO Performances

Forthcoming Journal of Business Economics and Management, Forthcoming

33 Pages Posted: 23 Dec 2012

See all articles by Hung-Bin Ding

Hung-Bin Ding

Loyola University Maryland

Kuntara Pukthuanthong

University of Missouri, Columbia

Date Written: December 23, 2012

Abstract

It is important for IPO firms to establish legitimacy in the eyes of investors through signaling. The objective of this research is to examine the relationship between signals including governance and management practices and the performance of family firms IPOs. Using IPO data of 129 family firms and 129 comparable non-family firms from Taiwan Stock Exchange, our findings highlighted the role of non-family insiders, or non-family affiliated directors in the IPOs of family firms. Our comparison between family and non-family IPOs shows hiring prestigious underwriters significantly improves the performance of family firm IPOs. Finally, we found the industries of IPO firms moderate the relationship between corporate governance characteristics and IPO performances, as non-family firms in technology industries are perceived to be more legitimate than their family counterparts. This paper makes three contributions to existing research. Firstly, we contribute to the legitimacy theory by suggesting an interaction effect between internal (organizational) and external (environmental) factors. Secondly, our analysis highlighted the roles of affiliated directors and industry in the performances of public family firms. Thirdly, this study contributes to the family business research by underscoring the differences between family and non-family firms in the IPO context.

Keywords: legitimacy, signaling, family ownership, family firms, Taiwan, initial public offering

JEL Classification: G30, L26, M10

Suggested Citation

Ding, Hung-Bin and Pukthuanthong, Kuntara, Legitimacy Signals and Family IPO Performances (December 23, 2012). Forthcoming Journal of Business Economics and Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2193159

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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