How do Founder Status and Institutional Investors Enhance the Effect of Internationalization on IPO Wealth?
Article Sidebar
Main Article Content
Abstract
Previous research has indicated that internationalization can reduce underpricing. To enrich its effect, this study extended the examination to the three-way interaction effects of internationalization, founder status, and institutional investors on IPO underpricing. The data from 92 Thai IPOs from 2013 to 2021 were collected and Hayes’s regression-based analysis was used to analyze moderated moderation. Founder status and the proportion of institutional investors were taken as the moderators to explain the mechanism of the effect of internationalization on underpricing. The key findings show that internationalization decreased underpricing, and became stronger in non-founder CEO firms. However, internationalization increased underpricing and became stronger in founder-CEO firms. Moreover, this two-way interaction was stronger when it was moderated by institutional investors. In the cases of the low and moderate levels of institutional investors, the effects of internationalization on underpricing became more negative in firms with a non-founder CEO, but more positive in firms with a founder CEO. The effects of internationalization on underpricing depended upon the founder’s status and the level of institutional investors. Thus, internationalization, a non-founder CEO, and the low and moderate levels of institutional investors can increase IPO wealth by lowering the IPO underpricing.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Views and opinions appearing in the Journal it is the responsibility of the author of the article, and does not constitute the view and responsibility of the editorial team.
References
Al-Shammari, H. A., Ross O'Brien, W., & Hamed AlBusaidi, Y. (2013). Firm internationalization and IPO firm performance: The moderating effects of firm ownership structure. International Journal of Commerce and Management, 23(3), 242-261.
Arthurs, J. D., Hoskisson, R. E., Busenitz, L. W., & Johnson, R. A. (2008). Managerial agents watching other agents: Multiple agency conflicts regarding underpricing in IPO firms. Academy of Management Journal, 51(2), 277-294. https://doi.org/10.5465/AMJ.2008.31767256
Boonchuaymetta, E., & Chuanrommanee, W. (2013). Management of the IPO performance in Thailand. Journal of Multinational Financial Management, 23(4), 272-284.
Certo, S. T., Covin, J. G., Daily, C. M., & Dalton, D. R. (2001). Wealth and the effects of founder management among IPO‐stage new ventures. Strategic management Journal, 22(6-7), 641-658.
Certo, S. T., Holcomb, T. R., & Holmes Jr, R. M. (2009). IPO research in management and entrepreneurship: Moving the agenda forward. Journal of management, 35(6), 1340-1378.
Darmadi, S., & Gunawan, R. (2013). Underpricing, board structure, and ownership: An empirical examination of Indonesian IPO firms. Managerial Finance, 39(2), 181-200. https://doi.org/10.1108/03074351311294016
Hayes, F.A. (2017). Introduction to mediation, moderation, and conditional process analysis: A regression-based approach. The Guilford Press.
Gao, N., & Jain, B. A. (2011). Founder CEO management and the long-run investment performance of IPO firms. Journal of Banking & Finance, 35(7), 1669-1682. DOI: https://doi.org/10.1016/j.jbankfin.2010.11.008
Hanafi, M. M., & Setiawan, A. (2018). Ownership concentration, institutional ownership, and IPO underpricing: evidence from Indonesia Stock Exchange. International Journal Of Governance and Financial Intermediation, 1(1), 3-17.
Hayes, A. F. (2012). PROCESS: A versatile computational tool for observed variable mediation, moderation, and conditional process modeling. In United States: University of Kansas, KS.
Hsieh, T.-J., Chen, Y.-J., & Tsai, H.-C. (2017). Business Group Internationalization, Family Control and IPO Underpricing. Managemant Review, 36, 117-136.
Kongkaew, T., Tongkong, S., & Ngudgratoke, S. (2021). Moderating Effects of Founders’ Role on the Influence of Internationalization on IPO Performance of Listed Companies in Thailand. International Journal of Financial Studies, 9(3). DOI: 10.3390/ijfs9030037
Lieberman, M. G., & Morris, J. D. (2014). The precise effect of multicollinearity on classification prediction. Multiple Linear Regression Viewpoints, 40(1), 5-10. http://www.glmj.org/archives/articles/Lieberman_v40n1.pdf
LiPuma, J. A. (2012). Internationalization and the IPO performance of new ventures. Journal of Business Research, 65(7), 914-921. doi:https://doi.org/10.1016/j.jbusres.2011.05.007
Ljungqvist, A. P., & Wilhelm Jr, W. J. (2002). IPO allocations: Discriminatory or discretionary?. Journal of Financial Economics, 65(2), 167-201.
Loughran, T., & Ritter, J. R. (2002). Why don’t issuers get upset about leaving money on the table in IPOs?. The Review of Financial Studies, 15(2), 413-444. DOI:10.2139/ssrn.243145
Lowry, M., Michaely, R., & Volkova, E. (2017). Initial public offerings: A synthesis of the literature and directions for future research. Foundations and Trends® in Finance, 11(3-4), 154-320. http://dx.doi.org/10.1561/0500000050
Lucas, D. J., & McDonald, R. L. (1990). Equity issues and stock price dynamics. The journal of finance, 45(4), 1019-1043. https://doi.org/10.2307/2328713
Nelson, T. (2003). The persistence of founder influence: Management, ownership, and performance effects at initial public offering. Strategic management journal, 24(8), 707-724.
Oviatt, B. M., & McDougall, P. P. (1994). Toward a theory of international new ventures. Journal of international business studies, 25(1), 45-64.
Ozdemir, O., & Upneja, A. (2016). The role of internationalization on the IPO performance of service firms: Examination of initial returns, long-run returns, and survivability. International Business Review, 25(5), 997-1009. DOI https://doi.org/10.1016/j.ibusrev.2016.01.009
Peng, X., Jia, Y., & Chan, K. C. (2021). The impact of internationalization on IPO underpricing: A result of agency costs reduction, a certification effect, or a diversification benefit?. Finance Research Letters, 44(C). DOI: 10.1016/j.frl.2021.102059
Rock, K. (1986). Why New Issues Are Underpriced. Journal of Financial Economics, 15(1-2), 187-212. https://doi.org/10.1016/0304-405X(86)90054-1
Shantha Kumari, S. S. (2008). Multicollinearity: Estimation and elimination. Journal of Contemporary research in Management, 3(1), 87-95.
Stoughton, N. M., & Zechner, J. (1998). IPO-mechanisms, monitoring and ownership structure. Journal of Financial Economics, 49(1), 45-77. https://doi.org/10.1016/S0304-405X(98)00017-8
Velury, U., & Jenkins, D. S. (2006). Institutional ownership and the quality of earnings. Journal of Business Research, 59(9), 1043-1051. https://doi.org/10.1016/j.jbusres.2006.05.001
Vithessonthi, C. (2014). What explains the initial return of initial public offerings after the 1997 Asian financial crisis? Evidence from Thailand. Journal of Multinational Financial Management, 27, 89-113. DOI: 10.1016/j.mulfin.2014.05.002