Insiders’ Wealth Maximization in IPO Process

다국어 초록 (Multilingual Abstract)

We examine how controlling shareholders (or insiders) maximize their wealth in IPO process using Korean data. Specifically, we focus on the effects of ownership structure (direct ownership vs. indirect ownership) and their ownership change in Pre-IPO period on IPO pricing behavior and their share selling behavior in both secondary offerings and post lockup expiration. We find that controlling shareholders seldom participate in secondary offerings in Korea, especially when they control firms through direct ownership but they do sell their shares after the lockup expiration. The results show that when they increase their ownership in pre-IPO period, the probability of selling shares after the lockup expiration increases. We also find that the information momentum hypothesis by Aggarwal et al.(2002) holds for only direct ownership by controlling shareholders. Our results imply that controlling shareholders have strong incentives to maximize their wealth through IPOs, while they sell their indirect ownership at the IPO to disperse the ownership of the IPO firms.

목차 (Table of Contents)

• Abstract
• I. Introduction
• II. Sample and description of variables
• 1. IPO related variables
• 2. Ownership related variables
• 3. Descriptive Statistics
• III. Multivariate results
• 1. Ownership and IPO underpricing
• 2. Insider selling after lockup expiration
• IV. Summary and Conclusion
• References
• Table