How much prestige is enough? Assessing the value of multiple types of high-status affiliates for young firms

Timothy G. Pollock, Guoli Chen, Eric M. Jackson and Donald C. Hambrick

Journal of Business Venturing, 2010, vol. 25, issue 1, 6-23

Abstract: Young, unproven firms can signal their worthiness, or potential, through affiliations with various types of prestigious parties. Drawing from signaling theory, we present a formal consideration of the implications of multiple numbers and types of prestigious affiliates for IPO valuations. We argue that different types of prestigious affiliates - prestigious executives, directors, venture capital firms, and underwriters - convey different signals of IPO worth, depending on the extent to which they provide certification or substantive benefits. Based on a sample of 257 software IPOs, we find considerable support for our expectations. The benefits of prestigious executives and directors accumulate in a linear, more is better fashion; in contrast, the payoffs from VC and underwriter prestige accumulate in a curvilinear fashion. We discuss the theoretical implications of these findings and propose an agenda for future research.

Keywords: Initial; Public; Offerings; Prestige; Status; Underwriters; Venture; Capitalists; Signaling; Top; Management; Teams; Upper; Echelons (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (81)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbvent:v:25:y:2010:i:1:p:6-23

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