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Control dilution of an initial owner post-IPO: the impact of characteristics of ownership structure

Author

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  • Rihab Kriaa

    (University of Sousse
    University of Sousse)

  • Taher Hamza

    (University of Carthage
    Université of Orléans)

Abstract

In this paper, we investigate the impact of ownership structure’s characteristics on the probability of initial controlling shareholder’s (ICS) control dilution from a firm’s listing year to the five-year post-initial public offering (post-IPO) in the French context. We test in particular the effect of private benefits of control and family ownership and control concentration on control dilution. Using a sample of 165 French IPO firms over the period 1999–2010, we provide evidence that: (i) The probability of ICS’s control dilution decreases with high private benefits of control. (ii) A family ICS is less likely to experience control dilution than a non-family one. (iii) The probability of control dilution increases when the firm has a concentrated ownership. Therefore, agency problems and diversification are strong motivations for control dilution post-IPO. Our findings are robust even after using alternative control level and after running logit regression.

Suggested Citation

  • Rihab Kriaa & Taher Hamza, 2021. "Control dilution of an initial owner post-IPO: the impact of characteristics of ownership structure," SN Business & Economics, Springer, vol. 1(3), pages 1-35, March.
    • Handle: RePEc:spr:snbeco:v:1:y:2021:i:3:d:10.1007_s43546-021-00052-x
    DOI: 10.1007/s43546-021-00052-x
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    More about this item

    Keywords

    Family firm; Initial public offering; Initial controlling shareholder; Control dilution; Private benefits of control;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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