The gender composition of boards after an IPO

Purpose - The purpose of this paper is to empirically analyse the change in the gender composition of the boards of large Australian companies, after listing.
Design/methodology/approach - This study investigates the gender composition of the boards of large Australian companies at the time of the initial public offering (IPO) and subsequently as these companies mature into established public companies. It also investigates industry influences and organizational size influences on the board composition at the time of the IPO and subsequently.
Findings - No significant change is found in the proportion of male and female directors holding directorships at the time of the IPO and some five to eight years later when the company is recorded as a top 500 company (by market capitalization) on the Australian lists. This implies that the capital market is generally satisfied by the gender composition of boards from the time of the IPO.
Originality/value - This paper extends on previous work which provides evidence of a relatively low proportion of female directors on the boards of Australian initial public offerings.

Factors influencing money left on the table by property trust IPO issuers

While previous listed property trust (LPT) initial public offering (IPO) studies have identified low under pricing returns, this study specifically examines the amount of money left on the table by the pre-IPO owners in this category of IPO. This study investigates 58 property trust IPOs in Australia from 1994 to 2004 and finds that the amount of money left by LPT IPOs is considerably less than industrial company IPOs, implying considerably less uncertainty about the valuation of such IPOs compared to industrials. We also find that more recent (post 2000) LPT IPOs in Australia appear to be significantly different to previous LPT IPOs in both money left and under pricing terms.

Stakeholder and gender characteristics of mining and energy IPO boards of directors

The mining and energy sectors are particularly publicly sensitive sectors and subject to a high degree of public scrutiny. Evan and Freeman (1993) suggest that such public scrutiny needs may be better met by having direct public stakeholder representation on the board of directors. Similarly, Bilimoria (2000) argues a strong commercial case for engaging women on boards. This paper investigates the number and proportion of non equity holding public stakeholder directors and the number and proportion of women directors on the boards of Australian mining and energy company initial public offerings (IPOs) and reports a paucity of public stakeholder directors and also a low proportional female representation on such IPO boards.

Hot issues, new economy stocks and Australian industry IPO returns in the late 1990s

This paper analyses Australian IPOs at an industry level for the period 1994 to 1999. We find a significant relationship between capital weighted IPO industry returns and contemporaneous index returns suggesting that capital raising and money left on the table arguments matter. We do not find any hot issue years at an industry level. Further at an industry level we find that new economy listings are not different to listings from other sectors of the economy.

Analysis of IPO dividend forecasts for Australian LPTs

While dividend forecasts in the prospectuses of initial public offerings (IPOs) are common, Brown et al. (2000) have found them to be optimistically biased. This study investigates the dividend/distribution forecasts in the prospectuses of Australian LPT IPOs during the period 1994 to 2004 and finds on average that they are not optimistically biased. Because dividends have important cash flow implications for investors, this study also examines factors that might influence the magnitude of the errors between the forecast and the actual distributions. It finds that LPT IPOs that offer stapled securities have overestimated their distribution paying ability.

Auditor change during listing : effect on IPO premiums

The study investigates the relationship between auditing services provided to 213 listed firms over a period from 1996 to 2000 by reputable (or tier 1) and non-reputable (non-tier 1) audit firms and the initial returns at listing. We use market adjusted initial return to reflect the firm’s choice of auditor during the initial public offering (IPO’s). The findings show that there is an inclination for listed firms to engage tier 1 audit firms, probably due to management’s intention of signal the firm’s favorable private information and credibility and integrity of reported financial information and ultimately increasing their chances of getting listed. The findings alos show that there is no significant difference in the initial returns of IPO’s firms irrespective of the reputation of auditors. However, there is a significant difference in the initial return of main and second board firms at listing whether firms are either audited by Tier 1 or non-Tier 1 audit firms. Firms that had upward switch showed higher returns, inconsistent with the auditor reputation hypothesis. This results, however, could be biased by the large number of new firms that did not switch auditors at listing, probably due to lack of time to make changes before listing, and/or have engaged tier 1 auditors at incorporation in anticipation of listing. However, the findings showed significant higher returns for second board firms relative to main board firms. These results do not support the widely held view that firms that seek listing do switch auditors prior to their listing for positive market signalling. The results indicate that auditor’s reputation is not an important determinant of the IPO’s initial return.

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 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.

Does political capital create value in the IPO market? Evidence from China

This study examines the value of political capital in the Chinese IPO market. We find a positive relationship between a politically connected executive and the probability of IPO approval of entrepreneurial firms. We further identify that shareholders value those connections and give a market premium to connected firms after the firms go public. We provide evidence that other types of political capital gained through external sources, such as politically connected sponsors and PE investors, also bring benefits to the firms in their IPO approval, and these connections substitute for the effect of the executive's political connections on IPO approval. We argue that in emerging markets where government intervention is still prevalent, political capital does create value and entrepreneurial firms usually build political capital to facilitate their access to the IPO market, although other types of political capital do not bring further benefits into the post-IPO market.

Board structure and survival of new economy IPO firms

Research Question/Issue: This study examines the relevance of currently accepted best practice recommendations regarding board structure on the survival likelihood of new economy initial public offering companies. We argue that industry context determines governance outcomes. Research Findings/Insights: We study 125 Australian new economy firms listed between 1994 and 2002. Each firm is tracked until the end of 2007 for monitoring their survival. We find that board independence is associated with an increase in the likelihood of corporate survival. We also find that the benefits of board independence increase at a decreasing rate. Theoretical/Academic Implications: The standard best practice recommendation of board independence stems from the monitoring role of directors and is based on agency theory. The results from our study suggest that the recommendation regarding board independence does not work well for new economy firms. While the agency theory based model implies a monotonic relation between board independence and performance, our research suggests that the relationship is nonlinear. This variation occurs because of increased monitoring costs faced by outsiders due to higher information asymmetry and complexity of new economy firms. Our empirical results suggest that inside directors play a complementary role to outsiders in mitigating firm failure. Practitioner/Policy Implications: Our research offers insights to policy makers who are interested in setting best practice standards regarding board structure. Our research suggests that firm/industry characteristics play a crucial role in determining the optimal board structure. In firms/industries where outsiders face significantly higher information processing costs, insiders can play a valuable complementary role to outsiders in enhancing the effectiveness of the board. Thus future hard or soft regulations related to board structure should consider industry context.

Investment banks' entry into new IPO markets and IPO underpricing

We examine the relationship between investment banks' initial public offering (IPO) market shares and their prior IPO underpricing in the new IPO market for China-based companies on the Hong Kong Stock Exchange. To gain expertise in Chinese business practices, investment banks have the incentive to obtain business in this new IPO market by providing high offer prices to the issuer, leading to less underpricing and less money on the table. We hypothesize and find that the less an investment bank underprices Chinabased company IPOs, the greater its subsequent market share of China-based company IPOs in the Hong Kong Stock Exchange. Furthermore, this relationship is driven by a bank's initial China-based company IPO deals. These results suggest that in new IPO markets, investment banks' initial market shares, obtained through lower underpricing, help them grow their market shares in later periods, possibly through the expertise gained in the initial business.

The role of optimistic news stories in IPO pricing

This study investigates the influence of optimistic news stories on first-day pricing of initial public offerings (IPOs) in Australia between 1995 and 2005. Unlike the United States, Australia has no quiet-period regulation limiting the dissemination of information from media before IPO listing dates. We find that optimistic news stories are negatively associated with IPO underpricing. Results from a relative valuation model show that IPOs which received positive news stories ahead of the first trading day are not overpriced relative to their industry benchmarks. These results suggest that optimistic news stories mitigate information asymmetry and adverse selection problems. However, optimistic news stories do not appear to inflate the share price on the first day of trading. Our findings suggest that regulation mandating a 'quiet period' before the commencement of trading in IPOs is neither necessary nor desirable in the Australian environment.