Ownership Concentration and Firm Value: New Evidence from Owner Stakes in IPOs

63 Pages Posted: 20 May 2020 Last revised: 24 Sep 2020

See all articles by Borja Larrain

Borja Larrain

Pontificia Universidad Catolica de Chile

Peter Roosenboom

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Giorgo Sertsios

Universidad de los Andes, Chile

Francisco Urzúa I.

City University London - Sir John Cass Business School

Date Written: March 16, 2020

Abstract

We revisit the relationship between ownership concentration and firm value using hand-collected data on the stakes of owner-managers immediately before and after IPOs. We instrument for the reduction in concentration using market returns on the three months prior to the IPO. Short-run market returns are plausible instruments since owners engage in naïve market timing by selling more when prior returns are high, but high prior returns are unlikely to affect long-run firm value. As predicted by agency theory, a larger reduction in ownership concentration at the IPO is negatively related to valuation.

Keywords: ownership, agency costs, Tobin's Q, IPOs

JEL Classification: G32

Suggested Citation

Larrain, Borja and Roosenboom, Peter and Sertsios, Giorgo and Urzua, Francisco, Ownership Concentration and Firm Value: New Evidence from Owner Stakes in IPOs (March 16, 2020). Available at SSRN: https://ssrn.com/abstract=3583445 or http://dx.doi.org/10.2139/ssrn.3583445

Borja Larrain (Contact Author)

Pontificia Universidad Catolica de Chile ( email )

Ave. Vicuna Mackenna 4860, Macul
Santiago
Chile

HOME PAGE: http://economiayadministracion.uc.cl/personal/blarrain/

Peter Roosenboom

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T09-56
3000 DR Rotterdam
Netherlands
+31 10 40 82255 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Giorgo Sertsios

Universidad de los Andes, Chile ( email )

Mons. Álvaro del Portillo
Las Condes
Santiago, 12.455
Chile

Francisco Urzua

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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