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Motivation for Initial Public Offerings: Family versus Non-family Firms

Student: Zelenovskaya Ekaterina

Supervisor: Sergey Stepanov

Faculty: International College of Economics and Finance

Educational Programme: Financial Economics (Master)

Year of Graduation: 2020

The paper empirically examines what reasons force family firms to turn to an external source of finance, such as the capital market and how do they differ from non-family. To the best of our knowledge, this question has not been previously considered in the family context. To understand the motivation, we estimate the direction of the use of the primary equity raised from IPO. For example, if the IPO was motivated by debt repayment, the proceeds are more likely to be used for this purpose. Our sample accounts for 577 Japanese company that conducted IPOs from 2006 to 2015. Compared to non-family, family firms are more motivated by the possibility to increase cash reserves and capital expenditures, as well as less motivated by other potential uses of funds. We also examine the impact of an independent Board of Directors on decisions about the use of new capital raised in family firms. They smooth out the difference and limit the family in several cases. Key words: IPOs, family ownership, board independence

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