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Socioemotional wealth and IPO underpricing of family firms
Author(s) -
Leitterstorf Max P.,
Rau Sabine B.
Publication year - 2014
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.2236
Subject(s) - socioemotional selectivity theory , initial public offering , business , position (finance) , point (geometry) , order (exchange) , sample (material) , sacrifice , monetary economics , german , accounting , economics , finance , psychology , developmental psychology , chemistry , geometry , mathematics , archaeology , chromatography , history
Socioemotional wealth ( SEW ), i.e., the noneconomic utility a family derives from its ownership position in a firm, is the primary reference point for family firms. Family firms are willing to sacrifice economic gains in order to preserve their noneconomic utility. Thus, we argue that family firms sacrifice IPO proceeds by choosing higher IPO underpricing than nonfamily firms if underpricing helps them protect their SEW . Our empirical results, based on a sample of 153 G erman IPO s, support our hypothesis. On average, family firms have 10 percentage points more IPO underpricing than nonfamily firms. Copyright © 2014 John Wiley & Sons, Ltd.