Family ownership, governance choices and post-ipo performance

Abstract

The purpose of this study is to evaluate the extent governance choices at the time of going public differ for family versus non family firms. In addition, the short and long-run performance of family and non-family firms after their initial public offering (IPO) is examined. The results indicate significant differences between family versus non-family firms on governance choices at the time of their IPO related to dual class structures, board composition, board size, and board leadership structure. Additionally, the results suggest that investors assign a lower valuation at IPO to family firms. Further, governance mechanism that strengthen family control differentially influence post-IPO underpricing. Finally, the results suggest that family firms underperform non-family firms in terms of long-run post-IPO investment performance.