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Jean Helwege, Christo Pirinsky, René M. Stulz
NBER Working Paper No. 11505
Issued in August 2005
NBER Program(s): CF
---- Abstract -----
We consider IPO firms from 1970 to 2001 and examine the evolution of their insider ownership over
time to understand better why and how U.S. firms that become widely held do so. In our sample, a
majority of firms has insider ownership below 20% after ten years. We find that a firm's stock market
performance and trading play an extremely important role in its insider ownership dynamics. Firms
that experience large decreases in insider ownership and/or become widely held are firms with high
valuations, good recent stock market performance, and liquid markets for their stocks. In contrast
and surprisingly, variables suggested by agency theory have limited success in explaining the
evolution of insider ownership.
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