Frontiers of Entrepreneurship Research
1996 Edition

 

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USING OWNERSHIP AS AN INCENTIVE: DOES THE "TOO MANY CHIEFS" RULE APPLY IN INITIAL PUBLIC OFFERING (IPO) FIRMS?

Theresa M. Welbourne, Cornell University


Menu
Introduction
Agency Theory and Ownership
Research Method
Results
Discussion
References


ABSTRACT

Agency theory is used to study the effectiveness of ownership proliferation throughout entrepreneurial organizations. Hypotheses are developed to understand the effect of CEO, top management, and all employee ownership on firm performance. The research is conducted with a sample of IPO firms followed for five years to study ownership and firm performance (survival and stock performance). The results indicate that all employee ownership has a positive effect on survival, while CEO and management ownership have no effect. However, CEO and top management ownership do affect stock price. Ownership significantly interacts with firm risk, indicating riskier firms benefit less from ownership.

 

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1997 Babson College All Rights Reserved
Last Updated 4/27/97 by Germaine Wong

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