Title: Interaction effects between internal governance mechanisms on the IPO long-term performance

Authors: Mediha Mezhoud; Thouraya Thabet

Addresses: Department of Finance, University of Tunis, Sousse Higher Institute of Management, Rue Abdelaaziz il Behi, BP 763, Sousse, Tunisia ' Department of Finance, University of Tunis, Graduate School of Business of Tunis, Ecole Supérieure de Commerce de Tunis-Campus Universitaire de la Manouba, 2010 la Manouba, Tunisia

Abstract: Our study is to contribute to the development of these reports, given the paucity of works that led to find relationships between these mechanisms and the long-term performance after IPO. This is the first study conducted in Paris stock exchange on interaction effects between governance mechanisms on the long-term performance following the IPO. The empirical results constitute a contribution even if they are too significant. Therefore, the results show that the interaction between board independence and ownership concentration affects positively and significantly the long-term performance. This may be due to an effect of complementarity that can favourably influence the abnormal returns after IPO. In other words, the interdependence between ownership concentration and board independence helps strengthen the control within the firm by encouraging managers to act in the interests of shareholders and, therefore, in the interest of the firm, resulting in the improvement of the long-term performance. Thus, the interaction between institutional ownership and duality affects negatively and significantly the cumulative abnormal returns during the 24 months following the IPO. This is attributed to the substitutability effect that is due to the fact that the disciplinary power of the board is lower as institutional ownership is important.

Keywords: BHARs; buy and hold abnormal returns; board of directors; complementarity effect; CARs; cumulative abnormal returns; ownership structure; substitutability effect; internal governance mechanisms; initial public offerings; IPOs; long-term performance; institutional ownership; duality.

DOI: 10.1504/IJCG.2016.078383

International Journal of Corporate Governance, 2016 Vol.7 No.2, pp.164 - 179

Accepted: 20 Jun 2016
Published online: 15 Aug 2016 *

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