University of Twente Student Theses


Aggregated Ownership: The effect of ownership on first day post-IPO performance

Ramaker, S. (2016) Aggregated Ownership: The effect of ownership on first day post-IPO performance.

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Abstract:During an initial public offering – or IPO – a company presents shares to the public for the first time. For most companies, it one of the most important decisions made so far, and will bring many consequences. The ownership structure will change since the public can now become partially owner of the company. This research tries to find a new way to predict the performance on the first day of trading by using the pre-IPO owners. Previous mainstream literature uses only the most important shareholders, most often the controlling shareholders, to predict this performance. A recent study used the term aggregated ownership to include all types and sizes of ownership. This study adopts this point of view by trying to predict the first day performance by using all the pre-IPO owners instead of the controlling owners. The Dutch equity market is used to test the aggregated ownership. The sample consists of 67 cases of companies going IPO in the period between 1995 and 2015. In total 337 IPO cases were available but after filtering for IPOs which did not go live, were also listed elsewhere, have a re-admission, are investment or financial entities, are state owned or for the lack of information, a total of 67 cases remained available for this research. The regression showed – in general – alignment with the hypotheses. The main issue is the lack of significance which make the results unusable for drawing actual, factual, conclusions. The various models found evidence for a higher first day return when founders are involved, but no -shaped relation could be found. The involvement of non-founder EO and other insiders regarding first day return appeared to be mixed in line with literature. Despite this, results are opposite of the expected, showing a slight negative impact on the return. The same can be said for other outsiders, who show a negative impact on first day performance, as predicted. The VC ownership on the other hand does have a positive effect on the first day performance, in line with its hypothesis. Unfortunately, no interaction effect could be found and as such, no evidence could be found for aggregated ownership. The aggregated ownership has no significant effect on the first day performance in the Dutch equity market. Further research might focus on different countries or a more refined way of testing for the possible effects of aggregated ownership.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
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