What use of proceeds do family IPOs signal? The influence of family generational stage and family CEO

Purpose: This study investigates the relationship between the family generational stage and the intended use of the Initial Public Offering (IPO) proceeds disclosed in the prospectus. With the aim to explore family business heterogeneity, it also explores the moderating role of the family CEO. Design/methodology/approach: We draw on signaling theory and hand-collected data on Italian family IPOs that occurred in the period 2000-2020, disentangling the intended use of IPO proceeds as distinguished into three categories. We employ logit regression to test our hypotheses. Findings: According to our theoretical predictions, we find that the family generational stage positively affects the disclosure of the investment reason as the intended use of IPO proceeds, while it negatively influences the use for recapitalization and general corporate purposes. The first relationship is moderated by the presence of a family CEO. Our results remain robust with different family business definitions and a different empirical method. Originality: The paper is the first to address the topic of the intended use of IPO proceeds in family businesses. In doing so, it opens avenues for future research by enriching an underdeveloped, albeit growing, area of research, that of preparing for the market scrutiny in family IPOs.