Date of Award


Degree Type


Degree Name

Doctor of Philosophy (PhD)




Ravi Dharwadkar

Second Advisor

Ravi Dharwadkar


Corporate Governance, Strategic Management

Subject Categories



In this dissertation we collate a unique hand-collected dataset of 417 IPO firms for the 2001 to 2004 period, and study the effectiveness of governance and signaling mechanisms at an IPO. In chapter 1 our main contention is that current management research on IPOs has primarily looked at how corporate governance variables like board composition and ownership structure affect IPO underpricing, while largely overlooking the implications of these governance structures for long-term liquidity. This is a significant oversight, given the many benefits to IPO issuers from having a liquid stock (e.g., reduced cost of capital, increased external monitoring etc.). We find that both pre-IPO ownership structures and the degree of underpricing affect aftermarket liquidity. More specifically, the information advantages of large ownership reduce stock liquidity, while increased liquidity following greater underpricing underlines a key benefit of underpricing that has been previously ignored. We are therefore able to present a fuller picture of pre-IPO ownership and underpricing and their long term performance implications. In chapter 2 we look at how signaling at the time of IPO certifies firm quality and helps address the adverse selection problem for uninformed investors. We contend that classifying signals according to common characteristics (like cost) has significant managerial implications in terms of whether, when and how much firms need to invest in developing signals, and how these decisions are likely to influence subsequent firm performance. We then contribute to the literature by proposing a typology of signals based on whether signaling costs are incurred upfront (default-independent) or whether they depend on future profitability (default-contingent). We argue that this definitional distinction highlights more fundamental differences in the underlying characteristics of the two signal types in terms of cost, clarity, consistency, commitment and visibility. Only default-independent signals usually possess these desirable characteristics, making them more powerful determinants of firm value than default-contingent signals.


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