Why Do Firms Become Widely Held? An Analysis of the ynamics of Corporate Ownership

Jean Helwege, Christo Pirinsky and René M. Stulz

No 11505, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We consider IPO firms from 1970 to 2001 and examine the evolution of their insider ownership over time to understand better why and how U.S. firms that become widely held do so. In our sample, a majority of firms has insider ownership below 20% after ten years. We find that a firm's stock market performance and trading play an extremely important role in its insider ownership dynamics. Firms that experience large decreases in insider ownership and/or become widely held are firms with high valuations, good recent stock market performance, and liquid markets for their stocks. In contrast and surprisingly, variables suggested by agency theory have limited success in explaining the evolution of insider ownership.

JEL-codes: G30 G32 D0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-fin
Date: 2005-08
Note: CF
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