Effects of founder CEO duality and board size on foreign IPOs’ survival in US markets

Abstract

Purpose This study aims to investigate how three critical governance decisions by foreign firms impacted their survivability post-initial public offerings (IPO): the choice of CEO (founder vs non-founder); the power the founder CEO wields relative to the board in terms of CEO duality; and board size. Design/methodology/approach This study uses data from 86 foreign firms that completed IPOs in the US market between 2000 and 2008 and adopts a Cox proportional hazards model to examine how the founder, founder CEO duality and board size influence foreign firm delisting post-IPO. Findings A founder CEO or a founder CEO with duality (i.e. when a founder CEO is also chair of the board of directors) does not support a foreign firm’s survival post-IPO. Expectedly, board size has a negative impact on post-IPO firm survivability; however, founder CEO duality positively moderates this negative relationship. Therefore, founder CEO duality plays a positive indirect role in the context of post-IPO firms with large boards. Originality/value First, while the benefits of CEO duality have been empirically ambiguous, this study clarifies how founder CEO duality manifests its positive impacts in foreign listings. Second, by focusing on board cognition, this study confirms the negative impact of large boards, but highlights that this can be mitigated by governance leadership structure. Finally, despite organizational life-cycle theorists’ advocacy of the replacement of founder CEOs with professional CEOs in sizable ventures, this study shows the benefits of their retention when the board is large.

Impact of corporate governance and CEO remuneration on bank capitalization strategies and payout decision in income shocks period

“…So, based on findings, effective board size favors the shareholder interest by maintaining minimum capitalization and shifting the risk from shareholder to debt holder in the Pakistani context. While in the case of CEO duality, findings also show a significant negative relationship, which is also consistent with the study of Lee and Ko ( 2022 ). Board independent non-executive directors and dividend payout ratio are in support of the fourth hypothesis, which states that there is a relationship between independent non-executive directors and dividend payout ratio among the Malaysian sample companies, which these results also support (Subramaniam et al, 2022 ).…”

Evaluation of Differences in Performance Between Shareholder-Ceo-Led and Professional-Ceo-Led Large Companies in Lithuania

“…As such, they did not find strong or consistent evidence of superior long-run investment performance on the part of founder-CEO-led IPO firms relative to similar non-founder-CEO-led IPO firms. An analogous conclusion was also reached by Lee and Ko (2022) who in their research could not support a presumption of a positive correlation between the presence of founder-CEOs and the foreign firms' longer term survival post-IPO. Willard et al (1992) found no significant differences in performance between foundermanaged and professionally managed firms in the study of 155 mostly high-tech manufacturing firms from the list of the 100 fastest-growing publicly held firms in U.S. On average, founder-managed firms were somewhat (but not significantly) smaller and were growing at a slightly (but not significantly) lower rate.…”

“…Usually, researchers in the field of performance differences of founder-CEO-led and professional-CEO-led companies base their research on publicly available data of IPO companies that are listed on the stock exchanges (e.g., Lee & Ko, 2022;Lee et al, 2020;Mousa et al, 2014;Gao & Jain, 2011) with the main measure being stock market performance. This approach was not valid in the case of Lithuanian companies since the Nasdaq Vilnius stock exchange had only 25 companies listed combined on the Main and Secondary lists as of August 1, 2022.…”

Corporate wrongdoing and board leadership structure: An analysis of the WestJet spying scandal

“…Moreover, Beddoe's different sources of power—formal (both CEO and chair and large ownership stake) and informal (founder stature, tenure, firm‐ and industry‐specific knowledge, and external networks)— created a power bundle which, in combination with his discretion, explains why duality at WestJet worked well for eight years. This configurational approach (Lewellyn & Fainshmidt, 2017) also facilitated our inclusion of other contexts, like organizational life cycle stage (Elsayed, 2007) and role of the founder/CEO (Lee & Ko, 2022), in the analysis of WestJet.…”

“…In view of these difficulties, some researchers have examined the effectiveness of board structure under a host of internal and/or external contexts, that is, environmental and temporal conditions (Brockman et al., 2004), degree of informal CEO power, firm performance, and the need for quick, decisive decision‐making (Finkelstein & D’Aveni, 1994), CEOs' motivational power (Martin & Butler, 2017), and founding CEO status (Lee & Ko, 2022). Other researchers have examined how internal and/or external contingencies dictate the relation between board structure and firm performance, that is, the nature of the industry (Boyd, 1995), family ownership stake (Braun & Sharma, 2007), the influence of top executives and block‐holding outside directors (Tang, 2017), and the “loan insider CEO,” that is, the CEO being the only board insider (Zorn et al., 2017).…”