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CEO career horizons and when to go public: the relationship between risk-taking, speed and CEO power

Mauro Romano (), Alessandro Cirillo (), Donata Mussolino () and Luca Pennacchio ()
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Mauro Romano: University of Foggia
Alessandro Cirillo: University of Foggia
Donata Mussolino: University of Napoli “Federico II”
Luca Pennacchio: Parthenope University of Naples

Journal of Management & Governance, 2019, vol. 23, issue 1, 139-163

Abstract: Abstract Initial public offerings make a noteworthy contribution to both the growth of equity markets and the promotion of entrepreneurial activities. As a strategic issue, the decision on when to go public depends on the firm’s leader, and the personal characteristics of chief executives (CEOs) have been found to affect the results of the initial public offering. This paper investigates whether the speed with which firms go public depends on the CEO’s time to retirement, the so-called career horizon. Hypothesising that CEOs with short career horizons will be more risk-averse and aim to preserve their legacy, we found that CEO career horizon is negatively related to the time the firm takes to start the initial public offering. CEOs with longer career horizons make faster, more risky decisions, such as to go public, because of their risk-taking preferences. We also examined how the extent of CEO power affects this relationship. Our results show that a low level of power is linked to more risky decisions, so that powerful CEOs tend to be associated with taking longer to reach the point of initial public offering.

Keywords: CEO career horizon; CEO power; Time to IPO; Speed of decision; CEO risk-taking (search for similar items in EconPapers)
Date: 2019
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