Block‐holder ownership, family control and post‐listing performance of French IPOs

Abstract

Purpose

While advantageous, the role of family control is under‐explored in finance. Family ownership can help guarantee stability of business and long‐term planning. The purpose of this study is to examine whether block‐holder ownership differentially affects the long‐term performance of initial public offerings (IPOs), and verifies whether this effect differs between family and non‐family IPOs.

Design/methodology/approach

Using a sample of 163 French IPOs from 1996 to 2000, this paper examines the links between family control and the first‐year market performance. It focuses on IPOs where both families and Venture Capitalists (VCs) are engaged to lock‐in their shareholdings for a period of one year following the IPO date, and are thus expected, at least in the case of families, to provide an effective monitoring during this period.

Findings

The main findings bring support to the entrenchment hypothesis and show a negative, but weak, relationship between block‐holder ownership and the first year market performance (p=10 per cent). Moreover, there is cubic relationship between family ownership and post‐listing market performance where the first‐year buy‐and‐hold first decreases, then increases, and finally reverts to decline.

Originality/value

While most of prior research focuses on the association between ownership and governance effects on firms’ performances in publicly‐owned firms, this study demonstrates links between family control and performance in issuing firms operating in France, where family‐controlled IPOs are a common model of corporate governance.

Citation

Chahine, S. (2007), "Block‐holder ownership, family control and post‐listing performance of French IPOs", Managerial Finance, Vol. 33 No. 6, pp. 388-400. https://doi.org/10.1108/03074350710748740