Disproportionate ownership structure and IPO long-run performance of non-SOEs in China

This paper examines the relationship between ownership structures and IPO long-run performance of non-SOEs in China. Although non-SOEs underperform the market in general after IPO but the poor performance is mainly caused by the IPOs with ownership control wedge. Non-SOEs with one share one vote str...

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Bibliographic Details
Published in:China economic review 2015-02, Vol.32, p.27-42
Main Authors: Wang, Xiaoming, Cao, Jerry, Liu, Qigui, Tang, Jinghua, Tian, Gary Gang
Format: Article
Language:English
Subjects:
Disproportionate ownership
IPO
Long-run performance
Non-SOEs firms
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Summary:This paper examines the relationship between ownership structures and IPO long-run performance of non-SOEs in China. Although non-SOEs underperform the market in general after IPO but the poor performance is mainly caused by the IPOs with ownership control wedge. Non-SOEs with one share one vote structure outperform those with control-ownership wedge by 30% for three years post-IPO performance in adjusted buy-and-hold returns. Non-SOEs with control-ownership wedge have higher frequency of undertaking value-destroying related party transactions. These findings suggest that non-SOEs need to improve corporate governance such as disproportionate ownership structure to better safeguard the interest of long-run shareholders. •Poor post IPO performance of non-SOEs is mainly caused by ownership control wedge.•Firms with the wedge reduce adjusted buy-and-hold post IPO performance by 30%.•Firms with the wedge have higher frequency of value-destroying related party transactions.•Firms need to improve corporate governance such as disproportionate ownership structure.
ISSN:1043-951X
1873-7781
DOI:10.1016/j.chieco.2014.11.004