Ownership Structure and Long-Run Performance of French IPO Firms

Abstract

Many studies have attempted to explain the long-term underperformance phenomenon of initial public offerings (IPOs). In this paper, we use the specificities of the French market to analyze whether the control-ownership wedge explains IPO long-run performance. Moreover, we investigate whether this relationship is driven by high-tech firms. Using data from a sample of 402 French high-tech and non-high-tech IPOs that went public during 1997-2011, we find that the separation of ownership and control rights of the largest shareholder is negatively associated with long-term performance of French IPOs. This finding indicates that IPOs with disproportional ownership structure underperform other firms in the one- to five-year period following the initial offering. Such separation increases the likelihood that controlling shareholders extract private benefits of control to the detriment of minority shareholders, leading to a low long-term performance. The empirical findings also show that our conclusions are not driven by high-tech firms.

The Rich Get Richer and the Poor Get Poorer: Social Media and the Post-IPO Behavior of Investors in Biotechnology Firms: The Relationship with Twitter Volume

“…For two of the three exchanges, the CAAR was not statistically significant for the three years post-IPO; in the third exchange, CAAR was −30.08% at month 36 post-IPO. The findings of Boubaker et al [11], who investigated the underperformance of 402 French firms that went public during the period from 1998 to 2011, suggest that excess control (the difference between control rights and cash flow rights) is negatively associated with long-term performance because it increases the likelihood that controlling shareholders will extract the private benefits of control, to the detriment of minority shareholders. Kumar and Sahoo [12], analyzing the Indian market IPOs from 2009 to 2014, reported a negative average CAAR of −41.05% in the 36 months post-IPO.…”

The Rich Get Richer and the Poor Get Poorer: Social Media and the Post-IPO Behavior of Investors in Biotechnology Firms: The Relationship with Twitter Volume

“…For two of the three exchanges, the CAAR was not statistically significant for the three years post-IPO; in the third exchange, CAAR was −30.08% at month 36 post-IPO. The findings of Boubaker et al (2020), who investigated the underperformance of 402 French firms that went public during the period from 1998 to 2011, suggest that excess control (the difference between control rights and cash flow rights) is negatively associated with long-term performance because it increases the likelihood that controlling shareholders will extract the private benefits of control, to the detriment of minority shareholders. Kumar and Sahoo (2021), analyzing the Indian market IPOs from 2009 to 2014, reported a negative average CAAR of −41.05% in the 36 months post-IPO.…”

The Value of Social Capital for the Success of SPAC IPOs

“…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).…”