Family involvement signals in initial public offerings

Jeffrey A. Chandler, G. Tyge Payne, Curt Moore, Keith H. Brigham

Research output: Contribution to journalArticle

3 Scopus citations

Abstract

Utilizing signaling theory, this study examines the relationship between signals of family involvement (i.e., family ownership and management) and the performance of firms undergoing an initial public offering (IPO). Specifically, we argue that firms using family-oriented language in their IPO prospectus results in greater IPO underpricing due to the misalignment between IPO investors’ general perceptions of family business and their expectations for the IPO. Additionally, we argue that this misalignment is more pronounced for firms in high-tech industries, which are commonly more risk- and growth-oriented. Using a sample of 155 U.S.-based firms that made their IPO between 2009 and 2012, we find support for our hypotheses. Overall, our findings demonstrate that more observable signals of family involvement in an IPO may negatively influence IPO performance, particularly in high-tech industries.

Original languageEnglish
Pages (from-to)8-16
Number of pages9
JournalJournal of Family Business Strategy
Volume10
Issue number1
DOIs
StatePublished - Mar 2019

Keywords

  • Content analysis
  • Family involvement signals
  • High-tech firms
  • Initial public offering
  • Signaling theory
  • Underpricing

Fingerprint Dive into the research topics of 'Family involvement signals in initial public offerings'. Together they form a unique fingerprint.

  • Cite this