IPO Valuation of European Pyramidal Groups

This paper investigates the valuation of firms belonging to European pyramidal groups at the time of their IPO. In two independent samples of firms that went public in Europe over the last decade, we find that the market-to-book ratio at IPO is positively affected by affiliation with a pyramidal group. The two samples are modeled using ordinary least squares regressions controlling for firm- and offer-specific variables such as age, size, and underpricing. Pyramidal companies thus appear to be more highly valued by investors, who may believe that this ownership structure substitutes for weak market institutions.