The Conflict between Agency Theory and Corporate Control on Managerial Ownership: The Evidence from Taiwan IPO Performance

23 Pages Posted: 6 Dec 2004

See all articles by Anlin Chen

Anlin Chen

National Sun Yat-sen University - Department of Business Management

Lanfeng Kao

National University of Kaohsiung - Department of Finance

Abstract

When a private-held firm goes public through an IPO (initial public offering) process, the managerial ownership of the IPO firm declines due to external equity financing. The effects of dilution of ownership structure on firm performance are different with respect to the agency theory and corporate control theory. For Taiwan IPOs, we argue that the level of managerial ownership of IPO firms at issuance is basically high enough to control the firm. We show that the increase of managerial ownership of IPO firms in the early aftermarket would be hazardous to firm performance. That is, the corporate control benefit dominates the agency costs of IPO firm from the point of view of managerial ownership.

Keywords: Managerial ownership, inside ownership, agency theory, corporate control, initial public offerings

JEL Classification: G32, G34

Suggested Citation

Chen, Anlin and Kao, Lanfeng, The Conflict between Agency Theory and Corporate Control on Managerial Ownership: The Evidence from Taiwan IPO Performance. Available at SSRN: https://ssrn.com/abstract=627003

Anlin Chen (Contact Author)

National Sun Yat-sen University - Department of Business Management ( email )

Kaohsiung 80424
Taiwan
886-7-5252000x4656 (Phone)
886-7-5254698 (Fax)

Lanfeng Kao

National University of Kaohsiung - Department of Finance ( email )

700 Kaohsiung University Rd.
Nanzih District
Kaohsiung 803
Taiwan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,347
Abstract Views
4,427
rank
17,268
PlumX Metrics