Ownership and operating performance of companies that go public

Abstract

Going public typically leads to a separation of managerial control and stock ownership, and potentially worsens managerial incentives. We document that the median ownership stake of officers and directors declines significantly from the year before going public to ten years later. Median operating return on assets also declines from the year before the offering to the end of the first year of public trading, but performance declines no further in ten years. In general, operating performance both within one year of the offering and during the first ten years of public trading is unrelated to ownership of officers and directors.