IDEAS home Printed from https://ideas.repec.org/a/sae/entthe/v25y2000i1p93-106.html
   My bibliography  Save this article

The People/Performance Balance in IPO Firms: The Effect of the Chief Executive Officer's Financial Orientation

Author

Listed:
  • Alice O. Andrews
  • Theresa M. Welbourne

Abstract

Welbourne and Andrews (1996) studied IPO firms and found that Tobin's Q, at the time of the IPO, was lower for firms that they coded as having higher levels of human resource value (HR Value). However, those same firms were more likely to survive five years after the IPO. Given that finding, this study examines one factor that may influence the firm's choice between maximizing short-term financial performance (doing well at the IPO) or long-term performance (maximizing HR value). Using the theory of upper echelons (Hambrick & Mason, 1984), we show that the decision on how to balance these forces is shaped in part by the chief executive officer's (CEO) functional background. We focus on CEOs with primary training in finance because they will most closely identify with investment community pressures to perform well at the time of the IPO. In two different samples of IPO firms, we find that the CEO's financial background is associated with lower levels of human resource value, but, contrary to what we expected, having a finance-oriented CEO does not maximize short-term gains in the IPO.

Suggested Citation

  • Alice O. Andrews & Theresa M. Welbourne, 2000. "The People/Performance Balance in IPO Firms: The Effect of the Chief Executive Officer's Financial Orientation," Entrepreneurship Theory and Practice, , vol. 25(1), pages 93-106, October.
  • Handle: RePEc:sae:entthe:v:25:y:2000:i:1:p:93-106
    DOI: 10.1177/104225870002500108
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/104225870002500108
    Download Restriction: no

    File URL: https://libkey.io/10.1177/104225870002500108?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Garry Bruton & Vance Fried & Robert D. Hisrich, 1997. "Venture Capitalist and CEO Dismissal," Entrepreneurship Theory and Practice, , vol. 21(3), pages 41-54, April.
    2. Roland Calori & Gerry Johnson & Philippe Sarnin, 1994. "Ceos' cognitive maps and the scope of the organization," Strategic Management Journal, Wiley Blackwell, vol. 15(6), pages 437-457, July.
    3. Smirlock, Michael & Gilligan, Thomas & Marshall, William, 1984. "Tobin's q and the Structure-Performance Relationship," American Economic Review, American Economic Association, vol. 74(5), pages 1051-1060, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xuequn Wang & Leonard M. Jessup, 2014. "A Review and Synthesis of Entrepreneurship Research: Towards an Integrative Model of Dependent Variables," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 23(2), pages 163-199, September.
    2. Catherine M. Daily & S. Trevis Certo & Dan R. Dalton & Rungpen Roengpitya, 2003. "IPO Underpricing: A Meta-Analysis and Research Synthesis," Entrepreneurship Theory and Practice, , vol. 27(3), pages 271-295, July.
    3. Cirillo, Alessandro & Romano, Mauro & Pennacchio, Luca, 2015. "All the power in two hands: The role of CEOs in family IPOs," European Management Journal, Elsevier, vol. 33(5), pages 392-406.
    4. Alexandra Dawson & Imants Paeglis & Nilanjan Basu, 2018. "Founder as Steward or Agent? A Study of Founder Ownership and Firm Value," Entrepreneurship Theory and Practice, , vol. 42(6), pages 886-910, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Villalonga, Belen, 2004. "Intangible resources, Tobin's q, and sustainability of performance differences," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 205-230, June.
    2. Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, "undated". "The Effects of Megamergers on Efficiency and Prices: Evidence from a Bank Profit Function," Finance and Economics Discussion Series 1997-09, Board of Governors of the Federal Reserve System (U.S.), revised 10 Dec 2019.
    3. Ferdaws Ezzi & Mohamed Ali Azouzi & Anis Jarboui, 2015. "Environmental performance indicators of Tunisian companies: Analysis via the decision tree," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 5(8), pages 114-127, August.
    4. Louis T. W. Cheng & Hung‐Gay Fung & Tak Yan Leung, 2009. "Dividend preference of tradable‐share and non‐tradable‐share holders in Mainland China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(2), pages 291-316, June.
    5. Cuypers, I.R.P., 2009. "Essays on equity joint ventures, uncertainty and experience," Other publications TiSEM 8dc79e86-c625-467f-a450-8, Tilburg University, School of Economics and Management.
    6. Dickerson, Andrew P. & Gibson, Heather D. & Tsakalotos, Euclid, 2002. "Takeover risk and the market for corporate control: the experience of British firms in the 1970s and 1980s," International Journal of Industrial Organization, Elsevier, vol. 20(8), pages 1167-1195, October.
    7. Salvary, Stanley C. W., 2007. "Accounting: A General Commentary on an Empirical Science," MPRA Paper 5005, University Library of Munich, Germany, revised 10 Sep 2007.
    8. Andreea N. Kiss & Dirk Libaers & Pamela S. Barr & Tang Wang & Miles A. Zachary, 2020. "CEO cognitive flexibility, information search, and organizational ambidexterity," Strategic Management Journal, Wiley Blackwell, vol. 41(12), pages 2200-2233, December.
    9. De Jonghe, Olivier & Vennet, Rudi Vander, 2008. "Competition versus efficiency: What drives franchise values in European banking?," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1820-1835, September.
    10. Ramos-Garza, Claudia, 2009. "TMT strategic consensus in Mexican companies," Journal of Business Research, Elsevier, vol. 62(9), pages 854-860, September.
    11. Weber, Clarissa E. & Chahabadi, Dominik & Maurer, Indre, 2020. "Antecedents and performance effect of managerial misperception of institutional differences," Journal of World Business, Elsevier, vol. 55(1).
    12. Berger, Philip G. & Ofek, Eli, 1995. "Diversification's effect on firm value," Journal of Financial Economics, Elsevier, vol. 37(1), pages 39-65, January.
    13. Irene Wei Kiong Ting & Noor Azlinna Azizan & Rajesh Kumar Bhaskaran & Sujit K Sukumaran, 2019. "Corporate Social Performance and Firm Performance: Comparative Study among Developed and Emerging Market Firms," Sustainability, MDPI, vol. 12(1), pages 1-21, December.
    14. Henk W. Volberda & Nicolai J. Foss & Marjorie A. Lyles, 2010. "PERSPECTIVE---Absorbing the Concept of Absorptive Capacity: How to Realize Its Potential in the Organization Field," Organization Science, INFORMS, vol. 21(4), pages 931-951, August.
    15. Trien Le & Amon Chizema, 2011. "State ownership and firm performance: Evidence from the Chinese listed firms," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 2(2).
    16. Petty, Jeffrey S. & Gruber, Marc, 2011. ""In pursuit of the real deal": A longitudinal study of VC decision making," Journal of Business Venturing, Elsevier, vol. 26(2), pages 172-188, March.
    17. Yoojung Ahn, 2022. "A Socio-cognitive Model of Sustainability Performance: Linking CEO Career Experience, Social Ties, and Attention Breadth," Journal of Business Ethics, Springer, vol. 175(2), pages 303-321, January.
    18. Barrett, Gillian & Dooley, Lawrence & Bogue, Joe, 2021. "Open innovation within high-tech SMEs: A study of the entrepreneurial founder's influence on open innovation practices," Technovation, Elsevier, vol. 103(C).
    19. Gonzalez, Pedro & Vasconcellos, Geraldo M. & Kish, Richard J., 1998. "Cross-border mergers and acquisitions: The undervaluation hypothesis," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(1), pages 25-45.
    20. Douglas Evanoff & Larry Wall, 2001. "Sub-debt Yield Spreads as Bank Risk Measures," Journal of Financial Services Research, Springer;Western Finance Association, vol. 20(2), pages 121-145, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:entthe:v:25:y:2000:i:1:p:93-106. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.