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Underpricing and performance of Australian IPOs: the impact of founder effects
thesisposted on 2022-03-28, 10:44 authored by Long Zhang
Since 2010, on average over 70 initial public offerings (IPOs) are listed on the Australian Securities Exchange each year. These IPO firms have a wide range of performance in the short term and long term. The impact of founders on a firm's performance is a much debated topic and extant studies provide mixed evidence. Findings from other markets may not apply in Australian markets as different institutional and market settings may moderate and enhance the founder effect. This study assessed the effects of founders on IPO firms' performance in the short term and long term in Australia. By examining three founder variables of founder ownership, founder CEO and founder experience, we are able to identify founder effects on firm performance. With a dataset of 253 IPO firms from 2003 to 2013, we analysed the mean differences in IPO firms' performance among groups with different founder features. Our results indicate there are significant mean differences in underpricing between different levels of founder ownership. We conducted regression analysis for our whole sample and subsamples. Our results suggest a hump-shape curvilinear relationship between founder ownership and IPO underpricing in the short term. our findings show that IPO firms led by founder CEOs have poor performance in the long term. The analysis shows founder CEO firms are younger, smaller and have higher retained founder ownership compared to professional CEO firms.