Information asymmetry and investor valuation of IPOs: top management team legitimacy as a capital market signal

Boyd D. Cohen and Thomas J. Dean

Strategic Management Journal, 2005, vol. 26, issue 7, 683-690

Abstract: The condition of information asymmetry between current owners and potential IPO investors creates a context wherein the legitimacy of the top management team (TMT) may serve as a valid signal of value to potential investors. The results confirm our hypotheses that TMT legitimacy is negatively correlated with post‐IPO stock value run‐up. Our results support a previously unexplored view of the TMT as an important signal of value in IPOs, and suggest that dual benefits accrue to the TMT selection process in IPO firms. Copyright © 2005 John Wiley & Sons, Ltd.

Date: 2005
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