Bargaining on Board Structure at the Initial Public Offering

Peter Roosenboom ()

Journal of Management & Governance, 2005, vol. 9, issue 2, 198 pages

Abstract: Going public often creates an agency conflict between the owner-manager and minority shareholders. One possible way to resolve this conflict is through independent board monitoring. But board monitoring does not arise automatically in IPO companies. Owner-managers tend to entrench and capture the board. Analyzing a sample of French IPO firms, we find that the fraction of independent directors declines if the owner-manager is more powerful. However, we find that large pre-IPO non-management shareholders, such as venture capitalists, are successful in bargaining on board composition. These shareholders are successful in opposing the owner-manager and prevent a further reduction in the proportion of independent directors in the board. We also find that these shareholders contract on board composition in shareholder agreements. Copyright Springer 2005

Keywords: boards; initial public offerings (IPOs); going public; G32; G34 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s10997-005-4035-8

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