Founder management and the market for corporate control for IPO firms: The moderating effect of the power structure of the firm

Strategically camouflaged corporate governance in IPOs: Entrepreneurial masking and impression management

“…A long line of research has established that corporate governance matters in a firm's performance, and that firms with more entrenched management underperform firms with more shareholder-friendly governance (Bebchuk and Cohen, 2005;Bebchuk et al, 2009;Gompers et al, 2003). Some have questioned whether such agency conflicts are equally severe in entrepreneur-managed firms (Wasserman, 2006), arguing that the stewardship that the entrepreneur feels towards her firm may mitigate some of the traditional agency concerns (Gao and Jain, 2012). Our results suggest that investors should proceed with caution before lowering their guard.…”

All the power in two hands: The role of CEOs in family IPOs

“…This line of research is rooted in the idea that the founder CEO is a unique governance mechanism since s/he created the company and is thus more entrenched than outside CEOs. This phenomenon therefore calls for analyses through different economic lenses (Gao & Jain, 2012). Within this research stream, Jain and Tabak (2008) discuss whether a firm should adopt a CEO founder structure on issuing an IPO.…”

“…He (2008) finds that founder CEOs lead to greater financial performance and help firms overcome the "liability of newness" (Nelson, 2003); foundermanaged IPOs are thus more likely to survive. Gao and Jain (2012) look at the market for corporate control and suggest that founder CEO behaviours are motivated by the desire to maximise the acquisition premium of post-IPO firms. Fischer and Pollock (2004) support the idea that greater ownership concentration in the hands of the founder CEO will reduce the likelihood of IPO failure.…”

Evaluation of IPO-firm takeovers: an event study

“…And second targets that at least to some extent depend on the firm-specific knowledge of their initial founder CEO. In the latter case, we postulate a misalignment of interests, a mismatch, since those CEOs could be reluctant to be taken over if their specific human capital is strongly linked to the firm's tangible and intangible assets and may also lead to a hold-up problem for the acquirer after the merger (Hart and Moore 1990;Rajan and Zingales 1998;Lehmann et al 2012;Foss and Klein 2012;Gao and Jain 2012).…”

“…A related study is Gao and Jain (2012), analyzing whether measures of CEO power moderate the relationship between founder management and target IPO wealth. While their study focuses on CEO duality as a source of power in the bargaining process, our study draws on intellectual property rights linked to the founder CEO.…”