Specialist CEOs and IPO survival

Abstract

This study examines the influence of specialist CEOs on the probability of failure and survivability of initial public offering (IPO) firms. We construct a generalist skills index based on CEOs' past employment history in order to classify CEOs into specialist and generalist ones. Specialist CEOs pursue a career in particular functional roles, firms and industry sectors, as opposed to generalist CEOs who accumulate their work experience through various positions, firms and industries. We uncover strong evidence that IPO firms with a specialist CEO have a lower probability of failure and a longer time to survive in subsequent periods following the offering. The findings suggest that specialist managerial ability has significant implications for post-issue performance of newly listed firms. Additionally, specialist CEOs may have incentives that are more aligned with those of the firm and its shareholders; thus, they are more likely to enhance the viability of IPO firms for a longer period of time.

Stay Concentrated to Survive

“…We also control for other financial characteristics of firms at the time of going public, including Leverage, Profitability and Market-to-book (e.g. growth opportunities) (see, for example, Gounopoulos and Pham, 2017). We report a correlation matrix of the variables used in our study in Appendix B and find no evidence of multicollinearity.…”

“…Bertrand and Schoar (2003) document that managerial decisions affect firm performance and behavior. In terms of alleviating agency problems, Gounopoulos and Pham (2017) find that specialist CEOs who are more likely to pursue shareholder objectives significantly reduce mortality rates for newly listed firms. Thus, a manager's decision is a determinant of a firm's future.…”

“…As a result, such firms feature more volatile operating environments, which aggravate the moral hazard problem (Smith and Watts, 1992;Himmelberg et al, 1999). Managers who do not align with shareholder interests are likely to make inefficient decisions that result in IPO failure (see, for example, Gounopoulos and Pham, 2017). Therefore, we should expect geographic dispersion to increase the probability of firm failure risk in the post-offering period.…”

Economic and mathematical methods for assessing expertise of specialists of enterprises

“…All of these areas are closed in a radically dangerous rejection of the apparatus of the exact sciences and can hardly be attributed to the field of basic or applied sciences, and clearly and steadily to a political and philosophical orientation with obvious tendencies of transformation into semi-theological teachings of a semiphilosophical or pseudo-technical and technological sense. Practical experience has shown [4], [5], that a significant proportion of managers, researchers, and students experience enormous difficulties in correctly identifying management goals and even in relation to fairly trivial management situations [6]. It is obvious that the priority of the management area in the economic sphere will not only be preserved [7] but will also drastically increase in the future.…”

Market-based Financing Reforms and Shareholder Valuations: Event Study Evidence from the Chinese Science and Technology Innovation Board

“…The financial accessibilities of high-tech enterprises grow with stronger market inclusiveness, and more diversified market functions(Brown, Fazzari, & Petersen, 2009; Padilla-Ospina et al, 2018).Information asymmetry in IPO is anticipated to be lessened by the involvement of the market investors and the influences of IPO companies and its CEO competencies(Gounopoulos et al, 2018).…”