1
Journal
J
of Managgement Syystems
ISSN #104 1-2808
A Publiccation off the Assoociation of Managgement
____________
__________
___________
__________
__________________________________________________ SMALL
S
AN
ND MEDIUM SIZED ENTER
RPRISE P
PERFORM
MANCE
FOLLOWING AN INITIA
AL PUBLIC OFFER
RING: CO
ONSEQUE
ENCES O
OF
BOA
ARD OF DIRECTO
D
OR GOVERNANCE
E AND STOCK OW
WNERSHIP
P
John. A.
A Pearce II, Villanova Un
niversity, Vil lanova, Pen
nnsylvania, U
USA
Shawn D. Howton, Villanova Un
niversity, Villlanova, Pen
nnsylvania, U
USA
Shelly W.
W Howton, Villanova Un
niversity, Vil lanova, Pen
nnsylvania, U
USA
AB
BSTRACT
E
Entrepreneurship, strate
egic management and finance lite
eratures all support the
e theory tha
at a firm
u
undertakes an
a initial pub
blic offering (IPO)
(
to prov
vide liquidityy for its owne
ers and fund
ds for its gro
owth. Yet,
ffinancial perfformance in the years im
mmediately following
f
an IPO is commonly disap
ppointing. Th
he factors
that make a private firm
m attractive to
t public inv
vestors are e
evidently no
ot the same that enable
e a newly
p
public comp
pany to perfform well fin
nancially. Th
he wide-ran
nging search
h for variables that can
n reliably
fforetell the success
s
of a firm after its IPO has produced mixed resu
ults. Howeve
er, there ha
ave been
e
encouraging findings th
hat point to the importa
ance of a fiirm’s corporrate governa
ance structu
ure. This
investigation
n builds on
n prior res
search to study
s
the IPO-governance-performance rela
ationship.
S
Specifically, it investigattes the relattionship bettween CEO survival and firm perfo
ormance thro
ough the
IPO period, including cases
c
when the CEO is also the Founder off the firm a
and cases w
when the
F
Founder- CE
EO has bee
en replaced by a Succ
cessor-CEO. The study also gives special atte
ention to
cchanges in a company
y’s Boards of Directorrs’ size, co
omposition, and stock ownership and the
a
associated financial
f
perrformance of
o the firms. Empirical test resultss reveal sign
nificant perfformance
cconsequence
es of chan
nges in the governanc
ce and own
nership by 116 small and mediu
um sized
e
enterprises (SME)
(
that underwent
u
th
he IPO proce
ess.
K
Keywords:
Initial pub
blic offering (IPO), CEO
O continuity, Founder su
urvival, Small and mediu
um sized
enterprise
es (SME), Corporate gov
vernance
THE REALITY
R
OF POST-IP
PO CORPO
ORATE PER
RFORMANCE
mor for open
ning day shares of Initial Public Offferings (IPO
Os) belies a problematic longerInvestor clam
d growing bo
ody of evide
ence shows that IPOs siignificantly u
underperform
m in their
term reality. A large and
m
markets for the
t first three to five yea
ars after going public (c .f., Durukan, 2002; Bhabra & Pettw
wat, 2003;
2003). Alth
D
Daily, Certo,, Dalton & Roengpitya,
R
hough the ssearch for ca
auses of this propensitty toward
b
below average financial performanc
ce by new public
p
firms has produce
ed an intrigu
uing array o
of culprits
Journal off Managementt Systems, Vool. 25, Numbeer 1, 2015