Journal Article | Review of Financial Studies | March 2010

The Evolution of Corporate Ownership after IPO: The Impact of Investor Protection

by C. Fritz Foley and Robin Greenwood


We use firm-level data from 34 countries covering the 1995-2006 period to analyze how the characteristics of public markets shape the process by which firms become widely held. Firms in all countries in the sample tend to have concentrated ownership at the time they go public. Decreases in ownership concentration are more likely for firms in countries with stronger protections for minority shareholders, lower block premia, and more liquid stock markets. In these countries, firms are more likely to issue equity when investment opportunities are high, becoming widely held in the process. We find scant evidence, however, that changes in percentage blockholding forecast future returns, inconsistent with market timing theories. Our results suggest that liquidity-based theories of corporate ownership may have been underemphasized in previous cross-country studies.

Keywords: Financial Liquidity; Business History; Market Timing; Going Public; Business and Government Relations; Business and Shareholder Relations;


Foley, C. Fritz, and Robin Greenwood. "The Evolution of Corporate Ownership after IPO: The Impact of Investor Protection." Review of Financial Studies 23, no. 3 (March 2010). (Formerly NBER Working Paper No. 14557.)