Control dilution of an initial owner post-IPO: the impact of characteristics of ownership structure

In this paper, we investigate the impact of ownership structure’s characteristics on the probability of initial controlling shareholder’s (ICS) control dilution from a firm’s listing year to the five-year post-initial public offering (post-IPO) in the French context. We test in particular the effect of private benefits of control and family ownership and control concentration on control dilution. Using a sample of 165 French IPO firms over the period 1999–2010, we provide evidence that: (i) The probability of ICS’s control dilution decreases with high private benefits of control. (ii) A family ICS is less likely to experience control dilution than a non-family one. (iii) The probability of control dilution increases when the firm has a concentrated ownership. Therefore, agency problems and diversification are strong motivations for control dilution post-IPO. Our findings are robust even after using alternative control level and after running logit regression.