Title: Corporate governance and its impact on long-term performance of Indian IPOs: an empirical investigation

Authors: Sweta Agarwal; Vidhisha Vyas

Addresses: Lal Bahadur Shastri Institute of Management, 11/07 Sector 11, Dwarka New Delhi, 110075, India ' IILM University, Sector 53, Golf Course Road, Gurugram, India

Abstract: The study tries to evaluate the role of board characteristics and share ownership on long-term IPO performance using a sample of 135 IPOs listed during the period of April 2009 to May 2013. The study is among the first attempt in Indian markets to access the relationship between corporate governance mechanisms and long run IPO performance, measured by market adjusted abnormal return (BHAR). Corporate governance variables viz. board size, board independence, board reputation, board leadership, retained ownership of promoter, strategic investors, institutional investors and directors of the IPO firm are tested on the long-run returns. The study also evaluates the impact of control variables like issue size, leverage, age of IPO firm, rate of subscription, size of the firm and IPO grading on long-term returns. The results of the analysis show that there is a significant underperformance in the first two years post-listing. We found that the board size, promoter CEO and retained strategic investors ownership have significant impact on IPO long run performance. The paper highlights the relevance of corporate governance for issuing firm, investors and market regulator.

Keywords: IPO; corporate governance; ownership; long-term performance.

DOI: 10.1504/IJBEX.2022.125108

International Journal of Business Excellence, 2022 Vol.27 No.4, pp.571 - 593

Received: 11 Sep 2019
Accepted: 24 Jan 2020

Published online: 30 Aug 2022 *

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