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Reconciling Socioemotional Wealth with Financial Wealth in Family Firm IPOs

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  • Oscar Domenichelli
  • Camilla Mazzoli

Abstract

The aim of this paper is to shed light on whether initial public offering (IPO) share pricing as a strategic decision in family firms going public is impacted by socioemotional wealth (SEW). Previous literature maintained that family firms accept higher costs in terms of IPO underpricing (UP) than nonfamily firms to preserve their SEW, yet disregarding the incomplete information that UP provides. The authors contribute to existing literature on family-firm effect on the IPO pricing by embedding the primary market pricing perspective in the UP analysis. This study documents that family firms do not excessively forgo IPO earnings to protect their SEW; rather they compromise between financial wealth (FW) and SEW safeguarding by avoiding excess UP.

Suggested Citation

  • Oscar Domenichelli & Camilla Mazzoli, 2024. "Reconciling Socioemotional Wealth with Financial Wealth in Family Firm IPOs," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 16(7), pages 1-73, July.
    • Handle: RePEc:ibn:ijefaa:v:16:y:2024:i:7:p:73
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    References listed on IDEAS

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    1. Jonathan Reuter, 2006. "Are IPO Allocations for Sale? Evidence from Mutual Funds," Journal of Finance, American Finance Association, vol. 61(5), pages 2289-2324, October.
    2. Benveniste, Lawrence M. & Spindt, Paul A., 1989. "How investment bankers determine the offer price and allocation of new issues," Journal of Financial Economics, Elsevier, vol. 24(2), pages 343-361.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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