An Examination of Board Stability and the Long-Term Performance of Initial Public Offerings

We study the long-term stock performance of initial public offerings (IPOs). We examine how past performance affects the board of directors' stability and how changes in boards affect subsequent performance. We introduce a dynamic, scale invariant stability metric to measure such changes. Our r...

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Bibliographic Details
Published inFinancial management Vol. 31; no. 3; pp. 63 - 90
Main Authors Crutchley, Claire E., Garner, Jacqueline L., Marshall, Beverly B.
Format Journal Article
LanguageEnglish
Published Tampa Financial Management Association 01.10.2002
Blackwell Publishing Ltd
Subjects
Analysis
Boards of directors
Business structures
Capitalism
Capitalization
Chief executive officers
Corporate directors
Data collection
Evaluation
Financial performance
Going public (Securities)
Impact analysis
Initial public offerings
Organization theory
Outside directors
Regression analysis
Shareholders
Stockholders
Stocks
Studies
Turnover
Zero
United States
United States > US
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Summary:We study the long-term stock performance of initial public offerings (IPOs). We examine how past performance affects the board of directors' stability and how changes in boards affect subsequent performance. We introduce a dynamic, scale invariant stability metric to measure such changes. Our results indicate that among IPO firms, those with poorer initial performance experience greater board instability and that greater board stability is associated with improvement in subsequent performance. These results indicate that board members leave poorly performing firms, rather than shareholders replacing ineffective boards. Retaining boards that experience initial good performance is associated with continued success.
ISSN:0046-3892
1755-053X
DOI:10.2307/3666315