Financial wealth, socioemotional wealth, and founder exits: an empirical examination of Chinese IPOs

Abstract

Initial public offerings (IPOs) are typically viewed as the peak of entrepreneurial success, providing founder-CEOs a chance to profitably exit. Founder-CEOs, however, are often motivated by non-financial considerations in addition to the desire to amass wealth. According to the behavioral agency model, the founder-CEOs' framing of gains vs. losses of their wealth creation at IPO determines their risk aversion vs. risk taking behaviors. In addition, the behavioral agency model argues that founder-CEOs with a great deal of socioemotional wealth fear losing that wealth. This fear will attenuate their aversion to losing financial wealth. To test our model, we collected a sample of 130 entrepreneurial IPOs from 2004 to 2009 in China whose founder-CEOs left the firm after it went public. The results confirm a U-shaped relationship between the founder-CEOs' financial wealth and their exit speed after the IPO. A high level of socioemotional wealth, exemplified by the CEOs' tenure, a higher ratio of insiders on the board, and the age of the stock market, negatively moderates the effect of financial wealth. We contribute to the literature by providing empirical support for the behavioral agency model and founder-CEO exits in China by examining both financial and socioemotional wealth.

What to green: Family involvement and different types of eco‐innovation

“…A central tenet of BAM is that family firms' decisions depend on the reference point of decision‐makers, aiming to preserve or increase their SEW endowment (Cennamo et al, 2012; Samara et al, 2018; Swab et al, 2020). The SEW framework is effective in explaining how family involvement affects firms' decisions in both developed countries (Cennamo et al, 2012; Samara et al, 2018) and emerging markets (Jiao et al, 2021; Yang et al, 2020), as non‐financial priorities of SEW prevail in both contexts (Swab et al, 2020).…”