Board composition, share ownership, and ‘underpricing’ of U.K. IPO firms

Abstract

Using a sample of 251 IPOs in the United Kingdom, this paper examines interlinks between executive and nonexecutive characteristics, share ownership, and short‐term performance measured in terms of share offer ‘underpricing.’ It argues that executives' power and previous experience directly affect ex ante choice of nonexecutive directors and their ownership interests in the firm. These endogenously developed governance factors may be used by IPO teams strategically to reduce the extent of underpricing. However, there is a selective response of investors to different board characteristics and share ownership structure. Copyright © 2002 John Wiley & Sons, Ltd.

Strategic and institutional effects on foreign IPO performance: Examining the impact of country of origin, corporate governance, and host country effects

“…Previous IPO studies recognize potential signaling effects of the firm's governance characteristics (Certo et al, 2001;Filatotchev and Bishop, 2002;Sanders and Boivie, 2004) and demonstrate how corporate governance characteristics can reduce informational asymmetries and affect IPO performance (e.g., Certo et al, 2001;Filatotchev and Bishop, 2002;Sanders and Boivie, 2004). However, because extant research has predominantly centered upon domestic IPOs listing on local stock exchanges there is very little understanding of the role of governance in foreign IPO performance.…”

“…Researchers have looked at a wide assortment of organizational, and extra-organizational attributes that serve as important cues regarding the quality of a firm at IPO and lessen the likelihood managers would need to reduce the offer price in order to attract investors (e.g., Beatty, 1989;Carter and Manaster, 1990;Ritter, 2003). Governance characteristics are a particularly potent signal that investors consider when making decisions about the firm's ability to deal with information asymmetries and associated agency costs (e.g., Certo et al, 2001;Filatotchev and Bishop, 2002;Sanders and Boivie, 2004). We extend this strand of research further by suggesting that firm-level governance signals should be considered in conjunction with institutional environments of the IPO's firm home and host countries.…”

“…Scholars have focused upon uncovering a range of characteristics associated with the IPO firm that managers employ to convey its value to potential investors at IPO (e.g., Certo et al, 2001;Filatotchev and Bishop, 2002;Sanders and Boivie, 2004). Sending the right signals is particularly important to managers of foreign private firms because these firms suffer from both "liabilities of newness," and "liability of foreignness".…”

“…First, we develop theoretical arguments and provide empirical evidence that suggest investor protection in the country of origin significantly affects performance. Second, although previous IPO studies recognize potential signaling effects of the firm's governance characteristics (Certo et al, 2001;Filatotchev and Bishop, 2002;Sanders and Boivie, 2004), there is very little research on corporate governance effects on performance of foreign IPOs. By focusing on the signaling role of board independence, we attempt to close this conceptual and empirical gap.…”

Ingresos Netos Del Franquiciado: Una Señal Para Elegir Franquicia en Una Crisis

“…En los primeros años de funcionamiento de una enseña, el franquiciador solamente posee establecimientos propios donde prueba el concepto de negocio y evalúa las mejores prácticas con el fin de mantener la coherencia de todas las unidades de la cadena (Bradach, 1998). Esta información poseída por el franquiciador y de la cual pueden beneficiarse los potenciales franquiciados convierte a la propiedad de los establecimientos en una señal creíble de calidad de la cadena (Dant & Kaufmann, 2003;Filatotchev & Bishop, 2002).…”