The Interaction Among Multiple Governance Mechanisms in Young Newly Public Firms

Posted: 9 Nov 2009

See all articles by Michael S. Wilkins

Michael S. Wilkins

University of Kansas

Tammy K. Berry

affiliation not provided to SSRN

Paige Fields

University of Kansas

Date Written: 2006

Abstract

Confirms the finding of previous researchers that CEOownership declines following a firm’s initial public offerings (IPO).This study alsodetermines whether three governance mechanisms(compensation structure, board independence, and outside block ownership)change over time and compensate for decreases in post-IPO managerial ownership.Data on 109 firms, all of which were followed for up to eleven years aftertheir IPOs, are used to examine the interrelations among the three governancemechanisms for three subsamples of firms: those that remain independent, thosethat are acquired, and those that file for bankruptcy. Analysis of the data indicates that managerial ownership does indeed declineafter firms go public. Venture capital board membership, non-venture capitalboard independence, and unaffiliated block ownership increase as CEO ownershipdecreases following IPOs. As venture capital participation begins to decreaseover time, however, board membership increases, potentially allowing boardindependence to be maintained. Finally, the results suggest that governanceadaptations following IPOs happen only for firms that survive as independententities. (SAA)

Keywords: Firm survival, Chief executive officers (CEOs), Firm ownership, Firm governance, Boards of directors, Executive compensation, Initial public offerings (IPO), Organizational structures

Suggested Citation

Wilkins, Michael S. and Berry, Tammy K. and Fields, Paige, The Interaction Among Multiple Governance Mechanisms in Young Newly Public Firms (2006). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN: https://ssrn.com/abstract=1502547

Michael S. Wilkins (Contact Author)

University of Kansas ( email )

Capitol Federal Hall
1654 Naismith Dr.
Lawrence, KS 66045
United States

Tammy K. Berry

affiliation not provided to SSRN

Paige Fields

University of Kansas ( email )

1654 Naismith Dr.
Lawrence, KS 66045
United States

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