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The effects of management-board ties on IPO performance

Chahine, Salim and Goergen, Marc 2013. The effects of management-board ties on IPO performance. Journal of Corporate Finance 21 , pp. 153-179. 10.1016/j.jcorpfin.2013.02.001

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This paper studies the two potentially contrasting effects on IPO pricing and post-IPO operating performance of family ties as well as social ties the top management has with board members. While family ties may solve manager–owner conflicts of interests, they may also give rise to minority-shareholder expropriation and/or private benefits of control. Similarly, social ties may either create value or lead to entrenchment and excessive managerial power. Using q-analysis to measure the strength of top manager ties to board members, we find that IPO performance is positively related to the strength of social ties, but negatively to the strength of family ties. We also find that, controlling for social ties, board independence affects both IPO pricing and post-IPO operating performance. Further, we show that the association between IPO performance and ties depends on whether they are with inside or outside directors.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Uncontrolled Keywords: Social tie; Family tie; Entrenchment; Alignment of interest; IPO performance; q-analysis
Publisher: Elsevier
ISSN: 0929-1199
Last Modified: 04 Jun 2017 04:51

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