Board Independence, Ownership Structure and the Valuation of IPOs in Continental Europe

Fabio Bertoni, Michele Meoli and Silvio Vismara
Additional contact information
Michele Meoli: UniBg - Università degli Studi di Bergamo = University of Bergamo
Silvio Vismara: UniBg - Università degli Studi di Bergamo = University of Bergamo

Post-Print from HAL

Abstract: Research Question/Issue We combine the value-creation and value-protection views of the board of directors to study the impact of board independence (BI) on the value of the firm at the time of its initial public offering (IPO). Research Findings/Insights We conduct our analysis on a sample of 969 firms that went public in France, Germany, and Italy between 1995 and 2011. We show that BI is a critical factor in the valuation of IPO firms. Our results support both the value-creation and value-protection roles of the board of directors. The relative importance of the two roles of the board varies over time, with value-creation (value-protection) dominating in IPOs of young (mature) companies. Theoretical/Academic Implications Our theoretical framework combines the agency and resource-dependence theories. The impact of BI on IPO valuation depends on the importance of the value-creation and value-protection roles played by the board. The change in the relative importance of the two roles determines a U-shaped relationship between BI and firm age. Corporate governance is particularly important for young and innovative firms (where the resource-dependence theory applies, and governance acts as a value-creation device), as well as for mature firms and for companies where ownership and control are separated (where the agency theory applies, and governance serves as a value-protection mechanism for minority shareholders). Practitioner/Policy Implications We show that corporate governance is a significant factor affecting the valuation of an IPO company. The importance of BI varies substantially with the knowledge intensity of the industry, the separation between ownership and control, and the age of the listing company.

Date: 2014-03-01
References: Add references at CitEc
Citations: View citations in EconPapers (38)

Published in Corporate governance, 2014, 22 (2), 116-131 p. ⟨10.1111/corg.12051⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02313136

DOI: 10.1111/corg.12051

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().