Date of Graduation
Chambers College of Business and Economics
Alexei V Egorov
The first essay looks at the issue of long run performance of initial public offerings (IPOs). We provide a liquidity based explanation for why certain IPOs underperform in the long run. By separating IPOs into sub-samples based on excess liquidity, considered relative to benchmarks based on size, we find that IPO underperformance from 1993 to 2005 differs significantly based on the excess liquidity of an IPO. In general, positive excess liquidity portfolios tend to underperform compared to negative excess liquidity portfolios one to two years after the initial post IPO portfolio formation period. A potential explanation of the magnitude and extent of IPO underperformance is the liquidity profile of IPOs. More specifically, if there are more IPO firms characterized by positive excess liquidity in a given year, then the subsequent future returns could show underperformance.;The second essay relates corporate governance to firm's productivity growth. Given technological constraints, some firms are very efficient whereas others are not and some firms have much faster rates of innovation and productivity growth than others. Are these differences due to chance or are there some factors contributing to higher total factor productivity growth? In this paper, we find that firms with stronger shareholder rights have higher total productivity growth. By employing the governance index compiled by Gompers, Ishii, and Metrick (2003), we determine that the effect of governance on productivity varies positively with the quality of corporate governance. Furthermore, this relationship is strongest among firms which have the strongest shareholder rights.;The third essay serves as a connecting link between the first two essays. It looks at the differences in the long term performance of IPOs with strong and weak shareholder rights. We find that performance of IPOs is stronger for the larger firms. We also find that governance does play a part in how an IPO will perform in the long run. IPOs having stronger shareholder rights in most of our results perform better then IPOs with weak shareholder rights. There is also some evidence of underperformance for smaller firms that are less democratic even though our sample consists of relatively large IPOs.
Roychoudhury, Saurav, "Three essays on IPO, liquidity, and corporate governance" (2006). Graduate Theses, Dissertations, and Problem Reports. 4262.