The Influence of Founder Status on Firm Performance: Empirical Evidence from Canadian IPO Firms

Saif Ullah and Dan Zhang

International Journal of Economics and Finance, 2016, vol. 8, issue 11, 134

Abstract: This study compares performance for founder-managed firms and professional-managed firms by analyzing 138 Canadian IPO firms that went public from 2004 to 2013. In this paper, we measure firm performance in two ways- Tobin¡¯s Q and ROA are used to measure a firm¡¯s financial performance, while firm survival status is used as a supplementary performance measure. We find that founder-managed firms underperform and underlive their counterparts when firm performance is measured by Tobin¡¯s Q and survival status. Founder status is proved to be unrelated to ROA. The negative influence of founder status can be explained by the relevant transaction hypothesis, which states that founder-managers may act for the controlling family and are more concerned with the associated private income stream than with maximizing the value of the firm.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:8:y:2016:i:11:p:134

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