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The effects of management-board ties on IPO performance

Salim Chahine and Marc Goergen

Journal of Corporate Finance, 2013, vol. 21, issue C, 153-179

Abstract: 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.

Keywords: Social tie; Family tie; Entrenchment; Alignment of interest; IPO performance; q-analysis (search for similar items in EconPapers)
JEL-codes: G32 G34 L14 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:21:y:2013:i:c:p:153-179

DOI: 10.1016/j.jcorpfin.2013.02.001

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