Changes in Ownership Structure and Board Structure after an Initial Public Offering

Abstract

This study examines changes in ownership structure and board structure of initial public offering (IPO) firms as these firms mature. To measure changes, data on the characteristics of ownership structure and board structure are collected and compared at two time periods: the time of the IPO and five years after. The study also examines the association between changes in ownership structure and changes in board structure. Based on a sample of 88 Singapore IPO firms, the findings indicate that managerial ownership and blockholder ownership decline significantly after an IPO. However, blockholder ownership remains very high for Singapore IPO firms five years after the IPO. In addition, as IPO firms mature, the board structure changes to include more members and relatively more outside directors. However, although there are some leadership structure changes (leadership structure being defined as whether the CEO and Chairperson positions are held by the same individual), leadership structure tends to remain relatively stable over time. Consistent with predictions, there is a positive relationship between changes in board ownership and changes in proportion of executive directors, and a negative relationship between changes in blockholder ownership and changes in proportion of executive directors. We also find that firms with a greater decline in blockholder ownership are less likely to switch from unitary to dual leadership. However, there is no relationship between changes in board ownership and changes in leadership structure, nor was there any relationship between changes in ownership structure and changes in board size. Overall, there is some support for the argument that decreases in board ownership and increases in blockholder ownership lead to greater board independence.