Open AccessDeterminants of performance of closely – held (family) firms after going public: the role of the ownership structure, economy, changes in top management, partial sale, equity concentration after the IPO and shareholders in management
Author(s) -
José Manuel Bernardo Vaz Ferreira
Publication year - 2008
Publication title -
corporate ownership and control
Language(s) - English
Resource type - Journals
eISSN - 1810-0368
pISSN - 1727-9232
DOI - 10.22495/cocv5i2p5
Subject(s) - initial public offering , shareholder , business , equity (law) , profitability index , agency cost , monetary economics , finance , private equity , private investment in public equity , market economy , corporate governance , economics , private equity fund , political science , law
When a closely-held (family) company goes public, there are very specific and particular determinants that have crucial influences on the post-going public operational, social and financial performance of those firms. We investigate why firms decline significantly their profitability, efficiency, employment and activity levels, and show an increase on sales and capital investment when there is a transition from private to public ownership. We conclude that this decrease in performance is significantly higher, when one or more than one of the following facts happen after firms going public: first, when there are not shareholders in management, what implies increased agency costs; secondly, when the level of equity concentration after going public is low; in third place, when the level of equity retention by the founding shareholder is low; fourth, when the economy health during the timing of the sale is not in good shape; and lastly, when the old CEO is changed.