Does family involvement foster IPO value? Empirical analysis on Italian stock market

Abstract

Purpose

The purpose of this paper is to shed light on the relationship between family involvement and Initial Public Offering (IPO) value in the Italian context.

Design/methodology/approach

Based on a unique hand-collected data set, the authors test the hypotheses on companies that went public between 2000 and 2011, making inference on 113 firms using OLS hierarchical regressions. The authors quantify the IPO value from an outside investors’ perspective with two measures to proxy for IPO value in the short-term and apply robustness checks for long-run performance. In a stewardship framework, the authors examine demographic variables including family firm status, family involvement in managerial positions and family generations.

Findings

The results suggest that family firm status positively influences IPO value, that greater family involvement corresponds to higher IPO value and lastly, that the beneficial effect of family control is mainly attributable to the first generation. The results are robust to alternative specifications of each phenomenon.

Research limitations/implications

As a single-country study, the results refer exclusively to the Italian context and thus the evidence provided may not automatically be generalized to IPOs of comparable equity markets.

Originality/value

This study expands current knowledge by showing how investors “price” family ownership in an IPO; furthermore the authors assess how certain characteristics of family firms affect the IPOs (e.g. family involvement and intergenerational).

Citation

Cirillo, A., Romano, M. and Ardovino, O. (2015), "Does family involvement foster IPO value? Empirical analysis on Italian stock market", Management Decision, Vol. 53 No. 5, pp. 1125-1154. https://doi.org/10.1108/MD-11-2014-0639