Article

The Role of Corporate Governance in Initial Public Offerings: Evidence from Real Estate Investment Trusts

Journal of Law and Economics 01/2008; 51(3):539-562. pp.539-562
Source: RePEc

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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Keywords

Chicago
 
endogeneity problem present
 
firms
 
growth potential
 
higher valuations
 
initial public offering
 
IPO
 
IPO stage
 
IPOs-mitigates
 
long-term
 
long-term performance
 
peers
 
real estate investment trusts
 
seasoned firms' valuation
 
single industry
 
stronger governance structures
 
study analyzes