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Control Preference and Financial Attributes: Founders as CEOs in Small, Publicly Traded Firms

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  • William R. Lane

    (Louisiana State University)

  • Mel Jameson

    (University of Nevada, Las Vegas)

Abstract

Existing theories of the firm are silent with respect to cross-sectional differences in performance or characteristics of firms attributable to different types of managers. We hypothesize that the investment, financing and dividend decisions of founders differ systematically from those of nonfounder managers as a result of 1) founders valuing control more highly than do nonfounders, a condition we refer to as the control retention effect, and 2) founders being associated with younger, faster growing firms, a condition we label the life cycle effect. Our findings are that both effects are at work, but in different decision areas. No evidence is found that founders exploit their status to extract higher direct compensation.

Suggested Citation

  • William R. Lane & Mel Jameson, 1993. "Control Preference and Financial Attributes: Founders as CEOs in Small, Publicly Traded Firms," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 3(1), pages 43-62, Fall.
    • Handle: RePEc:pep:journl:v:3:y:1993:i:1:p:43-62
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    References listed on IDEAS

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    Cited by:

    1. McConaughy, Daniel L. & Walker, Michael C. & Henderson, Glenn Jr. & Mishra, Chandra S., 1998. "Founding family controlled firms: Efficiency and value," Review of Financial Economics, Elsevier, vol. 7(1), pages 1-19.
    2. Daniel L. McConaughy & Michael C. Walker & Glenn V. Henderson & Chandra S. Mishra, 1998. "Founding family controlled firms: Efficiency and value," Review of Financial Economics, John Wiley & Sons, vol. 7(1), pages 1-19.
    3. Sah, Nilesh B. & Banerjee, Anandi & Malm, James & Rahman, Anisur, 2022. "A good name is better than riches: Family firms and working capital management," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    4. Nilesh B. Sah & Anandi Banerjee & James Malm & Anisur Rahman, 2021. "A Good Name Is Better Than Riches: Family Firms and Working Capital Management," Discussion Paper Series 2021-02, McColl School of Business, Queens University of Charlotte.

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    More about this item

    Keywords

    Control Preference; Founder; CEO; Small Firm; Publicly Traded;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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