Can governance help in making an IPO “successful”? New evidence from Europe

Brogi, Marina; Lagasio, Valentina; Pesic, Valerio

doi:10.1111/jifm.12116

Cited by 10 publications

(14 citation statements)

References 50 publications

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“…Such accessible collections of information can largely assist IPO parties in determining the fair market value of IPO shares, which reflects on the aftermarket price performance. This interpretation is in conjunction with a similar remark highlighted by previous studies showing a great asymmetric information gap between the primary and secondary markets (Shi et al 2013;Hong et al 2014;Brogi et al 2020). The absence of IFRS exerting an effect on aftermarket performance of IPO firms could lead to the idea that the quality of formal institutions is the main player in the long-term performance of these Saudi firms.…”

Section: Discussionsupporting

confidence: 82%

“…This scenario is one where a change in the formal institutional quality is alone that has a positive effect on lowering IPO underpricing and improving the long-term performance of IPO firms (Jamaani & Ahmed 2021). This notion is built on the observations of the IPO underpricing and long-term performance literature, which argues that these two stock market phenomena can be affected by the existent of quality formal institutional environment (Zattoni et al 2017;Brogi et al 2020). This viewpoint suggests that asymmetry in the quality of formal institutions can influence the observed level of information asymmetry in the IPO market, therefore affecting the perceived level of IPO underpricing and long-term performance in that country.…”

Section: Hypothesismentioning

confidence: 99%

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The Concurrent Effects of IFRS Mandate and Formal Institutional Quality on the Aftermarket Performance of IPO Firms in Emerging Countries

Alidarous¹,

Jamaani²

2021

IJFR

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This paper provides the first empirical investigation seeking to find whether International Financial Reporting Standards (IFRS) mandate, changes in the quality of formal institutions, or, the concurrent effect of these two elements can explain the ongoing phenomenon of the aftermarket performance difference of Initial Public Offerings (IPO) firms. We perceive little awareness of the concurrent effect of IFRS mandate and the quality of formal institutions in emerging countries, although these nations account for more than half of the IFRS mandating countries. We employ numerous Difference-in-Differences (DiD) models utilizing reliable IPO and formal institutional data for Saudi Arabia from 2005 to 2017. Our empirical results show that the absence of IFRS influence in the aftermarket performance of IPO firms led us to posit that the quality of formal institutions is the key player in influencing long-term performance of IPO firms in Saudi Arabia. We uncover evidence showing that an improvement in formal institutional quality increases the long-term performance of IPO firms. We find no evidence of a concurrent effect of changes in formal institutional quality and IFRS mandate on the aftermarket performance of IPO firms. Our results show that what does really matter in relation to the aftermarket performance of IPO firms in Saudi Arabia, are the enhancements in the level of formal institutional quality. Our results provide some important implications for IFRS-IPO research.

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Section: Discussionsupporting

confidence: 82%

Section: Hypothesismentioning

confidence: 99%

The Concurrent Effects of IFRS Mandate and Formal Institutional Quality on the Aftermarket Performance of IPO Firms in Emerging Countries

Alidarous¹,

Jamaani²

2021

IJFR

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“…According to Corbetta and Salvato (2004), in a family-controlled firm, this ability is increased by family business experience and does not solely depend on a higher number of directors on the board (board size), on the presence of outsiders with different backgrounds (board composition) and on board activities (number of meetings, duration and frequency, as in other types of firms (Pfeffer, 1972;Hillman et al, 2000;Forbes and Milliken, 1999;Sonnenfeld, 2002). Third, to the best of our knowledge, this is the first study to apply a configurational approach to investigate board effectiveness in cash holding decisions and thus it is the first to overcome the "one-size-fits-all" prescriptions and move toward a "bundle" perspective (Brogi et al, 2020). Findings suggest that single governance mechanisms are not sufficient in reaching effectiveness in cash holding decisions.…”

Section: Contributionsmentioning

confidence: 84%

Does one size fit all? A configurational approach to board effectiveness in limiting the excess cash

Brogi

Gallucci

Santulli

2021

Self Cite

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Purpose The study, by focusing on a context dominated by firms with a concentrated ownership, in which type-II agency problems (principal-principal conflicts) may occur, aims to depict which board configurations may be effective in protecting minority shareholders by mitigating the risk of controlling shareholders' expropriation via cash holdings.Design/methodology/approach The research adopts a configurational approach and empirically conducts a fuzzy set/qualitative comparative analysis on a sample of 268 Italian listed companies.Findings The analysis depicts three combinations of board configurations and ownership structures that can be considered effective, namely Active Independent Control, Female Active Control and Double Internal Control.Originality/value The study revisits the topic of the risk of expropriation via cash holdings in a type-II agency problem framework and delineates the meaning of board effectiveness in a mature context ruled by family firms, like Italy. Furthermore, by drawing on a configurational approach, it overcomes the causality relationship between each board characteristic and cash holdings policies and reasons from a “bundle” perspective.

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“…This suggests that investors' decision to invest in a SPAC IPO during the socioeconomic malaise may be driven by recognition of the unique managerial capabilities and confidence in the SPAC's founder to succeed. 2 While studies on SPACs are sparse and most prior studies focused on the structural aspects (e.g., Cumming et al 2014;Kim et al 2020;Kolb and Tykvova 2016), an evolving literature stream considers IPO performance in relation to ownership structure (Boubaker et al 2020), governance quality (Brogi et al 2020), management earnings (Boubaker et al 2017), and aftermarket performance (Cao-Alvira and Rodríguez 2017). In response, a handful of studies analyse the performance of SPAC IPOs (e.g., Gahng et al 2021;Kiesel et al 2022).…”

Section: Introductionmentioning

confidence: 99%

The Value of Social Capital for the Success of SPAC IPOs

Haniffa

Hudaib²,

Nawaz

2022

IJFS

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This paper explores the role of social capital in contributing to the success of a new breed of organizations known as ‘blank check companies’ or special purpose acquisition companies (SPACs) that are set up solely to target and acquire listed companies as a fast-track route to gain listing status in the stock market. The paper is a case study of Pershing Square Holdings Ltd., St. Peter Port, UK (PSH), which launched SPAC IPOs (Initial Public Offerings), Pershing Square Tontine Holdings Ltd., New York, NY, USA (PSTH), which succeeded in raising the largest capital from influential investors in 2020. Social capital theory is employed to provide theoretical structure for the analysis. Using annual reports, publicly available information on the internet, as well as social media platforms related to the company and its strategy, the authors critically analyse and highlight how the Tontine’s founder and his team utilized their structural, relational, and cognitive social capital to attract investors and gained recognition as the most successful SPAC IPO in the market in 2020. The authors found the ability to structure a SPAC IPO that departs from a typical SPAC, and the choice of timing to enter the SPAC market resulted in an over subscription and higher market valuation ratings of its IPO, as well as allowed the sponsor to be selective of its investors. This is the first study to address the significance of social capital at the individual and organizational level in creating value for SPAC IPOs. Potential investors can gain understanding and insights on the mechanics of SPAC IPOs and the importance of the founder’s social capital in ensuring successful investment. Successful SPAC IPOs will create interest in the marketplace and enhance the value of investment for investors and helped private companies to get listed faster.

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Can governance help in making an IPO “successful”? New evidence from Europe

Cited by 10 publications

References 50 publications

The Concurrent Effects of IFRS Mandate and Formal Institutional Quality on the Aftermarket Performance of IPO Firms in Emerging Countries

The Concurrent Effects of IFRS Mandate and Formal Institutional Quality on the Aftermarket Performance of IPO Firms in Emerging Countries

Does one size fit all? A configurational approach to board effectiveness in limiting the excess cash

The Value of Social Capital for the Success of SPAC IPOs

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