The Role of Corporate Governance in Initial Public Offerings: Evidence from Real Estate Investment Trusts
ABSTRACT This study analyzes the impact of corporate governance structures at the initial public offering (IPO) date. We test hypotheses that firms with more shareholder-oriented governance structures receive higher valuations at the IPO stage and have better long-term performance. Our sample is a set of 107 IPOs of real estate investment trusts (REITs) between 1991 and 1998. Using a single industry and REITs in particular reduces potentially confounding effects due to differences in risk, transparency, and growth potential. We believe this-combined with our use of IPOs-mitigates the endogeneity problem present in studies of the impact of governance on seasoned firms' valuation. Our analysis indicates that firms with stronger governance structures have higher IPO valuations and better long-term operating performance than their peers. (c) 2008 by The University of Chicago. All rights reserved..
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ABSTRACT: As Under-pricing negatively influences firm value due to lower than expected IPO proceeds, corporations therefore, try to minimize the negative effect of underpricing on firm value before going public. Existing literature examined the function of corporate governance as a signalling device in reducing the level of underpricing in both developed and developing countries. However, no evidence has been found regarding the moderating effect of corporate governance tools (ownership structure and board composition) on relationship between informational asymmetry and level of underpricing. Current study therefore, by using sample data of 55 IPOs listed on KSE for the period of 2000 to 2011 examined the moderating effect of corporate governance on the relationship of information asymmetry and level of under-pricing. Empirical findings validated that information asymmetry is a significant determinant of level of under-pricing in Pakistan. The findings also reveal that corporate governance particularly institutional investment and CEO duality have an effect on the level of under-pricing and corporate governance adds value to the firm by reducing the level of under-pricing.Sciences International Lahore. 01/2013; 25(4):989-997.
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ABSTRACT: Real estate has been at the forefront of the financial crisis, with the intransparency of securitized products, such as MBS, CMBS, and CDOs, playing a critical role. Real estate equity investments have received less attention during the crisis. Listed property companies (REITs) offer an interesting perspective on the behavior of institutional investors in the real estate equity market. In this paper, we study the influence of the recent crisis on the relation between corporate governance and the performance of listed property companies in the U.S. We first investigate the effect of corporate governance structures on abnormal stock returns during the pre-crisis period, and then address the effects of the financial crisis on this relationship, during the recent period of economic distress. We find that firm-level corporate governance did not influence performance of real estate equity investments before the crisis, but the structure of corporate governance has become an important performance driver of real estate equity investments during and after the market downturn. One of the interpretations is that institutional investors have just started to recognize the importance of transparency in real estate equity investments during the recent crisis, which is fully consistent with the herd investments in securitized debt products, where opacity of the investments was so blissfully ignored.
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ABSTRACT: Compartamos is an exemplary case of private equity-backed governance in microfinance.Strategic Change 01/2012; 21(7-8):331-341.