Wealth and the effects of founder management among IPO-stage new ventures

IPO underpricing is inherently related to both wealth retention and wealth creation. This paper reviews the relationship between IPO underpricing and wealth, then presents the results of an empirical study of the impact of CEO founder status (i.e., is the CEO also the founder?) on IPO underpricing....

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Bibliographic Details
Published in:Strategic management journal 2001-06, Vol.22 (6-7), p.641-658
Main Authors: Certo, S. Trevis, Covin, Jeffrey G., Daily, Catherine M., Dalton, Dan R.
Format: Article
Language:English
Subjects:
Bank stocks
Boards of directors
Business management
Chief executive officers
Entrepreneurs
Equity
founder management
Going public
Hypotheses
Initial public offerings
initial public offerings (IPOs)
Investment bankers
Investment banking
Investment strategies
Investments
Investors
Market prices
Market shares
Prices
Shareholders
Stakeholders
Stock prices
Stockholders
Stocks
Strategic management
Studies
underpricing
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Summary:IPO underpricing is inherently related to both wealth retention and wealth creation. This paper reviews the relationship between IPO underpricing and wealth, then presents the results of an empirical study of the impact of CEO founder status (i.e., is the CEO also the founder?) on IPO underpricing. Results based on data collected from 368 IPO-stage new ventures suggest that founder management has a positive impact on IPO underpricing, and that the founder management-underpricing relationship is moderated by (a) the IPO market share of the investment banker employed and (b) the proportion of insiders on the IPO firm's board of directors.
ISSN:0143-2095
1097-0266
DOI:10.1002/smj.182