The study investigates the changes in the performance of Indian public firms post their Initial Public Offerings (IPOs) and their relationship, if any, with the ownership retained by the insiders after IPOs. The pre-IPO performance of Indian public firms is compared with their post-IPO performance. It was found that the performance of Indian public firms deteriorated significantly post their IPOs. Furthermore, firms, wherein ownership retained by insiders post their IPOs is lowest, experienced the greatest decrease in their post-IPO performance.

In the corporate governance literature, there is a continued debate about the basic relationship between the insiders' shareholding/ownership levels and the performance of firms. While numerous studies empirically confirmed a positive relationship between the changes in the levels of insiders' ownership and the performance of firms, as was proposed by Jensen and Meckling (1976), an equal number of studies evidenced a negative relationship between them, as was propounded by Fama and Jensen (1983). Hence, there is a lack of consensus regarding the exact relationship between the changes in the insiders' ownership and the performance of firms.

In recent years, researchers have studied the above relationship in the context of the business firms' decision to go public. Jain and Kini (1994) pioneered the research initiatives in the above direction by investigating the relationship between the ownership level of insiders in the post-IPO period and the post-IPO performance of firms with the help of a sample of 682 US public firms. They found a positive relationship between them. Subsequently, Mikkelson et al. (1997) and Kim et al. (2002) investigated the above relationship with their samples of firms derived from the UK and Thailand respectively. Mikkelson et al. (1997) argued against any significant relationship between the changes in the levels of insiders' ownership of firms at the time of IPOs and their post-IPO performance. Kim et al. (2002) evidenced a curvilinear relationship between them. While they found a positive relationship for firms with very low and very high levels of insiders' ownership, they discovered a negative relationship for firms with intermediate levels of insiders' ownership. Apparently, no consensus has emerged from the limited number of empirical studies done so far regarding the nature of relationship between the changes in the levels of insiders' ownership of firms at the time of IPOs and their post-IPO performance.

Applied Finance Journal, Initial Public Offerings, IPO, Corporate Governance, Indian Public Firms, Decision Making, Decision Making Authorities, Entrenchment Effect, State-Owned Enterprises, SOEs, Emerging Markets, Center For Monitoring Indian Economy, CMIE's, Securities and Exchange Board of India, SEBI.