Ownership Pre- and Post- IPOs and Operating Performance of Italian Firms

Abstract

Evidence shows that, after an IPO, firms usually report a decline in operating performance. This result is confirmed also for the Italian market. In this paper we investigate if this deterioration is explained by the change in ownership following IPO. In particular, we take into consideration two major dimensions of ownership: a quantitative one, indicating ownership concentration and represented by the stake held by top shareholders, and a qualitative one, about the type of shareholder and relative to the presence of private equity firm both before and after the IPO. The main hypotheses question if there are positive relationships between operating performance and the following dimensions: (i) the stake held by top 3 shareholders before IPO; (ii) its change following IPO; (iii) the presence of private equity firm before IPO; (iv) the presence of private equity firm after IPO. Interestingly, we find that ownership structure positively influences operating performance in the years before IPO, but this is not verified in the years after the IPO, although, in the sample, the relationships are all verified. This is an interesting finding of the paper, which should need further investigation.