THE ROLE OF DUALITY MANAGERIAL OWNERSHIP AND BOARDS ON IPO VALUE (AN EMPIRICAL EVIDENCE OF INDONESIAN FIRMS)

Maximus Leonardo Taolin, Julia Safitri

Abstract


The research aims to find the impact of ownership retention, managerial ownership, and boards on value IPO premium and underpricing. We investigate by using hand collect data 202 IPO prospectuses during 2008-2017 and using Warp PLS 5.0 to compute the data. Our finding suggests that may use to guide the investor in making informed decisions to see the level of the proportion of sharehold by old ownership and management. When the high level of ownership retention and managerial ownership, make the value IPO premium and underpricing will be high. On the other hand duality of the managerial role in firms making the value will be achieved. This paper contributes to the value of IPO premium and underpricing literature when influence by ownership share on initial public offerings  context of emerging markets.

Keywords: Ownership retention; Managerial Ownership; Boards; IPO premium; underpricing


Full Text:

PDF

References


Ahmed S. Alanazi, Liu, B., & Forster, J. (2011). The financial performance of Saudi Arabian IPOs. International Journal of Islamic and Middle Eastern Finance and Management, 4(2), 146-157,. doi: 10.1108/17538391111144533 10.1108/00021461311321311

Badru, B. O., Ahmad-Zaluki, N. A., & Wan-Hussin, W. N. (2017). Board Characteristics and the Amount of Capital Raised in the Malaysian IPO Market. Journal of Multinational Financial Management. doi: 10.1016/j.mulfin.2017.09.001

Barroso-Castro, C., Villegas-Perinan, M. M., & Dominguez, M. (2017). Board members’ contribution to strategy: The mediating role of board internal processe. European Research on Management and Business Economics, 23, 82–89. doi: 10.1016/j.iedeen.2017.01.002

Bennedsen, M., Kongsted, H. C., & Nielsen, K. M. (2008). The causal effect of board size in the performance of small and medium-sized firm. Journal of Banking & Finance(32), 1098–1109. doi: 10.1016/j.jbankfin.2007.09.016

Boulton, T. J., & Campbell, T. C. (2016). Managerial confidence and initial public offerings. Journal of Corporate Finance, 37(375–392). doi: 10.1016/j.jcorpfin.2016.01.015

Bruton, G. D., Filatotchev, I., Chahine, S., & Wright, M. (2010). Governance, ownership structure, and performance of IPO firms: the impact of different types of private equity investors and institutional environments. Strategic Management Journal, 31(5), 491-509. doi: 10.1002/smj.822

Certo, S. T., Covin, J. G., Dalton, D. R., & Daily, C. M. (2001). Wealth and The Effects of Founder Management Among IPO-Stage New Ventures. Strategic Management Journal, 22, 641–658. doi: 10.1002/smj.182

Certo, S. T., Daily, C. M., Jr, A. A. C., & Dalton, D. R. (2003). Giving Money to Get Money: How CEO Stock Options and CEO Equity Enhance IPO Valuations. The Academy of Management Journal, 46(5), 643-653.

Chahine, S., & Goergen, M. (2013). The effects of management-board ties on IPO performance. Journal of Corporate Finance, 21, 153-179. doi: 10.1016/j.jcorpfin.2013.02.001

Chahine, S., & Tohmé, N. S. (2009). Is CEO Duality Always Negative? An Exploration of CEO Duality and Ownership Structure in the Arab IPO Context. Corporate Governance: An International Review, 17(2), 123-141.

Cirillo, A., Romano, M., & Ardovino, O. (2015). Does family involvement foster IPO value? Empirical analysis on Italian stock market. Management Decision, 53(5), 1125 -1154.

Dalton, D. R., Daily, C. M., Johnson, J. L., & Ellstrand, A. E. (1999). Number of Directors and Financial Performance: A Meta-Analysis. Academy of Management Journal, 42(6), 674-686.

Darmadi, S., & Gunawan, R. (2013). Underpricing, board structure, and ownership. Managerial Finance, 39(2), 181 - 200.

Deb, P. (2014). Cutting The ‘Gordian Knot’: Director Ownership, Underpricing, And Stock Liquidity In IPO Firms. Journal Of Managerial Issues:, xxvi(2), 130-156.

Dharwadkar, R., George, G., & Brandes, P. (2000). Privatization in Emerging Economies: An Agency Theory Perspective. The Academy of Management Review, 25(3), 650-669. doi: 10.2307/259316

Djerbi, C., & Anis, J. (2015). Boards retained ownership and failure risk of French IPO firms. Corporate Governance, 15(1), 108 - 121.

Dolvin, S. D., & Kirby, J. E. (2016). The Impact of Board Structure on IPO Underpricing. The Journal Of Private Equity, 15-21.

Eisenberg, T., Sundgren, S., & Wells, M. T. (1998). Larger Board Size and Decreasing Firm Value in Small Firms. Journal of Financial Economics, 48, 35-54.

Escobari, Diego, dan Alejandro Serrano. 2016. "Reducing asymmetric information in venture capital backed IPOst." Managerial Finance no. 42 (6):553 - 568.

Elston, J. A., & Yang, J. J. (2010). Venture capital, ownership structure, accounting standards and IPO underpricing: Evidence from Germany. Journal of Economics and Business, 62(6), 517-536. doi: 10.1016/j.jeconbus.2010.08.003

Eugene F Fama, & Jensen, M. C. (1983). Separation of Ownership and Control. Journal of Law and Economics, XXVI(june).

Fan, Q. (2007). Earnings Management and Ownership Retention for Initial Public Offering Firms theory and Evidence. THE ACCOUNTING REVIEW, 82(1), 27–64.

Filatotchev, I., & Bishop, K. (2002). Board Composition, Share Ownership, and ‘Underpricing’ Of U.K. Ipo Firms. Strategic Management Journal, 23, 941–955. doi: 10.1002/smj.269

Grinblatt, M., & Hwang, C. Y. (1989). Signalling And The Pricing Of New Issues. THE JOURNAL OF FINANCE, Xliv(2 june), 393-420.

Gul, S., Muhammad, S., Nasir, R., & Farman, A. (2012). Agency cost, corporate governance and ownership structure: the case of Pakistan. International Journal of Business and Social Science, 3(9), 268-277.

Handa, R., & Singh, B. (2015). Women directors and IPO underpricing: evidence from Indian markets. Gender in Management: An International Journal,, 30(3), 186 - 205.

Hearn, Bruce. 2011. "The impact of corporate governance measures on theperformance of West African IPO firms." Emerging Markets Review no.12:130–151. doi: 10.1016/j.ememar.2011.02.004.

He, L., Cordeiro, J. J., & Shaw, T. S. (2015). CEO power, equity ownership and underwriter reputation as determinants of lockup period length. Management Research Review,, 35(5), 438 - 458.

Hermalin, B. E., & Weisbach, M. S. (2003). Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature. FRBNY Economic Policy Review, april, 7-26.

Howton, S. D., Howton, S. W., & Olson*, G. T. (2001). Board Ownership and IPO Returns. Journal Of Economics And Finance, 9(25), 100-114.

Hull, R., Walker, R., & Sungkyu Kwak. (2013). "IPO valuation and insider manipulation of R&D". Managerial Finance, 39(10), 888 - 914.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior,Agency Costs and Ownership Structure Journal of Financial Economics (Vol. 3, pp. 305-360).

Jigao Zhua, Ye, K., Tucker, J. W., & Chan, K. J. C. (2016). Board hierarchy, independent directors, and firmvalue: Evidence from China. Journal of Corporate Finance, 41, 262–279. doi: 10.1016/j.jcorpfin.2016.09.009

Keasey, K., & McGuinness, P. (1992). An Empirical Investigation of the Role of Signalling in the Valuation of Unseasoned Equity Issues. Accounting and Business Research, 22(86), 133-142. doi: 10.1080/00014788.1992.9729428

Kuntara Pukthuanthong-Le, & Walker, T. (2008). Family Control, Underwriter Prestige, and IPO Underpricing: A Cross Country Analysis. Multinational Business Review,, 16 (2 pp), 1 - 42

Leland, H. E., & Pyle, D. H. (1977). Informational Asymmetries, Financial Structure, And Financial Intermediation. THE JOURNAL OF FINANCE, XXXIL 2(2 May), 371-387.

Leone, A. J., Rock, S., & Willenborg, M. (2007). Disclosure of Intended Use of Proceeds and Underpricing in Initial Public Offerings. Journal of Accounting Research, 45(1), 111-153.

Li, M., Zheng, S. X., & Melancon, M. V. (2005). Underpricing, share retention, and the IPO aftermarket liquidity. International Journal of Managerial Finance,, 1(2), 76 - 94.

Lin, Chih-Pin, dan Cheng-Min Chuang. 2011. "Principal-Principal Conflicts and IPO Pricing in an Emerging Economy." Corporate Governance: An International Review no. 19 (6):585–600. doi: 10.1111/j.1467-8683.2011.00870.x

Maheshwari, Yogesh, dan Khushbu Agrawal. 2015. "Impact of IPO grading on earnings management." Journal of Financial Reporting and Accounting no. 13 (2):142 - 158.

Michel, A., Oded, J., & Shaked, I. (2014). Ownership structure and performance: Evidence from the public float in IPOs. Journal of Banking & Finance, 40, 54–61. doi: 10.1016/j.jbankfin.2013.11.018

Mnif., A. (2010). Board Of Directors And The Pricing Of Initial Public Of-Ferings (Ipos): Does The Existence Of A Properly Structured Board Matter? Evidence From France.

Mohd-Rashid, Abdul-Rahim, & N, C.-Y. (2016). Shareholder Retention Influence on the Flipping Activity of Malaysian IPOs. Pertanika J. Soc. Sci. & Hum, 24(s), 133 - 144.

Mousa, F.-T., Marlin, D., & Ritchie, W. J. (2013). Configurations of slack and their performance implications: an examination of high-tech IPOs. Management Decision, 51(2), 225 - 247.

Mousa, F.-T., Ritchie, W. J., & Reed, R. (2014). Founder-CEO board involvement and optimal IPO valuation. Management Decision, 52(3), 642 - 657.

Nakano, M., & Nguyen, P. (2012). Board Size and Corporate Risk Taking: Further Evidence from Japan. Corporate Governance: An International Review, 20(4), 369–387. doi: 10.1111/j.1467-8683.2012.00924.x

Nikbakht, E., Shahrokhi, M., & Robert Martin, J. (2007). IPO Pricing and Executive Compensation. International Journal Of Business, 12(3), 321-324.

Ritter, Jay R. 1991. "The Long-Run Performance Of Initial Public Offerings." The

Journal Of Finance no. Xlvi (1 March):3-26.

Salloum Charbel, B. E., Samara Georges. (2013). Impact of family involvement in ownership management and direction on financial performance of the Lebanese firms. i n t e r n a t i o n a l s t r a t e g i c m a n a g e m e n t r e v i e w, 30–41. doi: 10.1016/j.ism.2013.08.003

Samarakoon, L. P. (2010). The short-run underpricing of initial public offerings in the Sri Lankan stock market?. / J. of Multi. Fin. Manag., 20, 197–213. doi: 10.1016/j.mulfin.2010.07.003

Shleifer, A., & Vishny, R. W. (1997). A Survey of Corporate Governance. THE JOURNAL OF FINANCE, LII(2), 737-783.

Su, D. (2004). Leverage, insider ownership, and the underpricing of IPOs in China. Int. Fin. Markets, Inst. and Money, 14, 37–54. doi: 10.1016/S1042-4431(03)00043-X

Wang, K., & Iqbal, Z. (2006). Auditor choice, retained ownership, and earnings disclosure for IPO firms. International Journal of Managerial Finance, 2(3), 220 - 240.

Yasser, Q. R., & Mamun, A. A. (2015). Effects of ownership concentration on firm performance: Pakistani evidence. Journal of Asia Business Studies, 9(2), 162 - 176.

Yatim, P. (2011). Underpricing and Board Structures: An Investigation Of Malaysian Initial Public Offerings (IPOs). Asian Academy Of Management Journal Of Accounting And Finance, 7(1), 73-93.

Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40, 185-211.

Yong Wang, & Zhang., X. T. (2015). Strategic IPO Underpricing: The Role of Chinese State Ownership" In Value Creation in Multinational Enterprise. . Published online, 09(Maret),

-495.

Zhijian Xu Libo Xu. (2012). IPO valuation of entrepreneurial firms in China's new growth enterprise market. Journal of Chinese Entrepreneurship, 4(3), 206 - 220.

Zhou, J., & Lao, L.-J. (2012). Analysis of Influencing Factors of IPO Underpricing in ChiNext. Physics Procedia, 33, 846 – 851. doi: 10.1016/j.phpro.2012.05.144

Zimmerman, M. A. (2008). The Influence of Top Management Team Heterogeneity on the Capital Raised through an Initial Public Offering. Entrepreneurship Theory And Practice, 391-414.




DOI: https://doi.org/10.33633/jpeb.v5i2.3631

Article Metrics

Abstract view : 59 times
PDF - 25 times

DOI (PDF): https://doi.org/10.33633/jpeb.v5i2.3631.g2034

Refbacks

  • There are currently no refbacks.


 

Jurnal Penelitian Ekonomi dan Bisnis (JPEB)

Published by
Fakultas Ekonomi dan Bisnis | Universitas Dian Nuswantoro
Jalan Nakula I No. 5-11, Semarang 50131, Indonesia

Email: udinusjpeb@gmail.com
Phone: (024) 3567010
Website:  http://www.jpeb.dinus.ac.id

ISSN
2442-5028 (Print)
2460-4291 (Online)

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.