FAMILY FIRM IPO PERFORMANCE AND MARKET SIGNALS

Hung-Bin Ding () and Kuntara Pukthuanthong-Le ()
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Hung-Bin Ding: Loyola College in Maryland, 4501 N. Charles St., Baltimore, MD 21210, USA
Kuntara Pukthuanthong-Le: San Diego State University, 5500 Campanile Dr., San Diego, CA 92182, USA

Journal of Enterprising Culture (JEC), 2009, vol. 17, issue 01, 55-77

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 (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1142/S0218495809000266

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