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Why Do Firms Become Widely Held? An Analysis of the ynamics of Corporate Ownership

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  • Jean Helwege
  • Christo Pirinsky
  • René M. Stulz

Abstract

We consider IPO firms from 1970 to 2001 and examine the evolution of their insider ownership over time to understand better why and how U.S. firms that become widely held do so. In our sample, a majority of firms has insider ownership below 20% after ten years. We find that a firm's stock market performance and trading play an extremely important role in its insider ownership dynamics. Firms that experience large decreases in insider ownership and/or become widely held are firms with high valuations, good recent stock market performance, and liquid markets for their stocks. In contrast and surprisingly, variables suggested by agency theory have limited success in explaining the evolution of insider ownership.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11505.

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Date of creation: Aug 2005
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Handle: RePEc:nbr:nberwo:11505

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Cited by:
  1. René M. Stulz, 2009. "Securities Laws, Disclosure, and National Capital Markets in the Age of Financial Globalization," Journal of Accounting Research, Wiley Blackwell, vol. 47(2), pages 349-390, 05.
  2. Hamid Mehran & Stavros Peristiani, 2009. "Financial visibility and the decision to go private," Staff Reports 376, Federal Reserve Bank of New York.
  3. Irena Grosfeld, 2009. "Large shareholders and firm value: Are high-tech firms different?," Working Papers halshs-00587856, HAL.
  4. Grosfeld, Irena, 2009. "Large shareholders and firm value: Are high-tech firms different?," Economic Systems, Elsevier, vol. 33(3), pages 259-277, September.
  5. Hilt, Eric, 2008. "When did Ownership Separate from Control? Corporate Governance in the Early Nineteenth Century," The Journal of Economic History, Cambridge University Press, vol. 68(03), pages 645-685, September.
  6. Jiang, Li & Kim, Jeong-Bon & Pang, Lei, 2011. "Control-ownership wedge and investment sensitivity to stock price," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2856-2867, November.
  7. Fahlenbrach, Rüdiger & Stulz, René M., 2009. "Managerial ownership dynamics and firm value," Journal of Financial Economics, Elsevier, vol. 92(3), pages 342-361, June.
  8. C. Fritz Foley & Robin Greenwood, 2008. "The Evolution of Corporate Ownership After IPO: The Impact of Investor Protection," NBER Working Papers 14557, National Bureau of Economic Research, Inc.
  9. Helwege, Jean & Packer, Frank, 2009. "Private matters," Journal of Financial Intermediation, Elsevier, vol. 18(3), pages 362-383, July.
  10. Ayyagari, Meghana & Doidge, Craig, 2010. "Does cross-listing facilitate changes in corporate ownership and control?," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 208-223, January.
  11. Celikyurt, Ugur & Sevilir, Merih & Shivdasani, Anil, 2010. "Going public to acquire? The acquisition motive in IPOs," Journal of Financial Economics, Elsevier, vol. 96(3), pages 345-363, June.
  12. Weitzel, Utz & Kling, Gerhard, 2012. "Sold below value? Why some targets accept very low and even negative takeover premiums," MPRA Paper 42832, University Library of Munich, Germany.

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