The authors are respectively from Nanjing University and Sun Yat-Sen University. They thank Martin Walker (editor) and an anonymous referee for helpful comments and suggestions. They appreciate helpful suggestions from Joseph Fan, Qiang Cheng, Xiongsheng Yang, Qingchuan Hou, Siu Kai Choy, and seminar participants at Nanjing University, participants at the 2009 International Conference on Corporate Finance and Governance in Emerging Markets. Yu gratefully acknowledges financial support from the National Natural Science Foundation of China (Grant No. 70902008). Zheng gratefully acknowledges financial support from the National Natural Science Foundation of China (Grant No. 71002059). All errors remain the authors' own.
IPO Underpricing to Retain Family Control under Concentrated Ownership: Evidence from Hong Kong
Article first published online: 17 FEB 2012
© 2012 Blackwell Publishing Ltd
Journal of Business Finance & Accounting
Volume 39, Issue 5-6, pages 700–729, June/July 2012
How to Cite
Yu, X. and Zheng, Y. (2012), IPO Underpricing to Retain Family Control under Concentrated Ownership: Evidence from Hong Kong. Journal of Business Finance & Accounting, 39: 700–729. doi: 10.1111/j.1468-5957.2011.02278.x
- Issue published online: 3 JUL 2012
- Article first published online: 17 FEB 2012
- (Paper received September 2010, revised version accepted December 2011)
- family firms;
- retain control;
- concentrated ownership
Abstract: This study examines whether family firms utilize IPO underpricing in order to retain family control as a means of avoiding outside blockholders. Using a sample of firms listed in Hong Kong where corporate ownership is concentrated, we find that larger IPO underpricing is associated with stronger family involvement, and with greater potential for diffusing ownership among family members. We further find evidence that firms with strong family involvement attract more subscription for their shares, have less concentrated outside blockholdings, and reduce ownership more slowly than do firms with weak family involvement, suggesting that family owners use underpricing to reduce outside blockholdings. We also find that firms controlled by family trusts have less IPO underpricing, suggesting that IPO underpricing and the family trust are effective substitute methods for retaining family control.