The role of insider influence in mutual-to-stock conversions

Using a sample of 347 demutualizing thrifts from 1991 to 2004, we show that the level of inside participation is not a traditional signal of firrn performance. We conclude that unanticipated inside participation reflects the incentives of insiders to reduce the size of the offer to influence the level of expected initial public offer (IPO) returns. We find unanticipated inside participation is related to lower offer size and higher initial returns, but we do not find a relationship between inside participation and post-IPO performance.