I used the qualitative method of discourse analysis to identify the behavior of “insider ownership” in the Korean market. Insiders' ownership information immediately before IPOs is collected from IPO registration statement filed. This discourse analysis discusses that Korean IPO firms are required to report about insider ownership which is linked to direct ownership in the Korean Market.
Insider ownership is classified into either 'Direct ownership,' where controlling shareholders and their family members have only direct ownership of a firm, or 'Indirect ownership,' where they control a firm through affiliated firms in the same business group in addition to their direct ownership. Three variables for insiders' ownership level were used: aggregate insider ownership, including both direct and indirect ownership, direct ownership of controlling shareholders and their families, and indirect ownership through affiliated firms' ownership.
The insider ownership changes are examined in three ways: changes in insiders' aggregate ownership, changes in ownership by controlling shareholders and their family members, and changes in affiliated firms' ownership. As a result, with non-positive ownership increment, firms with positive ownership increment exhibit significantly lower first-day returns for total insider ownership, 20.66 percent for direct ownership, and 25.10 percent for indirect ownership, respectively.
The results show that the increase in ownership significantly increases probability of insiders' share selling after lockups in total and direct ownership are much larger than the ownership-level variables, confirming our conjecture that the change in controlling shareholders' pre-IPO ownership is more informative than the simple ownership level with regard to their strategic behaviors.
Findings and Conclusion
The discourse analysis results agree with the Pre-IPO Ownership and identify the impact of insiders’ ownership records on strategic behaviors to improve their wealth during the Initial Public Offering process. We speculate that possession outline prior to IPOs, IPO under pricing, insiders’ secondary providing, and proportioned share sales are all linked together and generate a positive results for the owners and the Korean Market. The findings determine that controlling shareholders with direct ownership have stronger incentives for wealth development than those with oblique ownership thru affiliated companies with the aid of promoting their shares for the duration of the Initial Public Offering process. Those findings examine the effects of insiders’ ownership tiers and ownership adjustments to share-promoting behaviors after expirations, are positive. The results determine that insiders’ possession level is definitely related to under pricing, linked with the discourse results. Insiders’ ownership also increases their direct possession in pre-IPO period growth with the possibility of insiders’ proportion selling after expiration. In addition to the probability, the quantity of shares offered is also appreciably higher when insiders increase direct ownership earlier than IPO and the share expenses increase for the duration of the expiration period. The results mean that the result of controlling shareholders’ ownership is an important factor related to insiders’ ownership in IPO markets together in Korea .