It is increasingly recognized in the management literature that the initial public off ering
(IPO) is an important stage in the life cycle of privately held and entrepreneurial fi rms.
At this critical juncture, a fi rm has overcome the fi rst challenges of its entrepreneurial
phase and entered a growth stage. As Fama and French ( 2004 : 229) emphasize, an IPO
“is the point of entry that gives fi rms expanded access to equity capital, allowing them to
emerge and grow.” An IPO can provide an entrepreneurial fi rm with critical resources
for its future expansion. It can also provide the entrepreneur with the fi rst substantive
access to cash from their investment of time and resources in the entrepreneurial eff ort.
Despite the growing awareness of the importance of IPOs among both academics and
the investor community, the process by which a privately held fi rm transforms itself into
a publicly traded company is still not well understood. While numerous studies have
investigated the determinants of the going public decision (e.g. Booth and Smith, 1986 ;
Jain and Kini, 1999 ) and post-issue performance (e.g. Beatty and Ritter, 1986 ; Brav,
Geczy, and Gompers, 2000 ; Espenlaub and Tonks, 1998 ; Michaely and Shaw, 1994 ), there
is relatively little research on the related but equally important issue of what factors
infl uence the corporate governance mechanism of a fi rm at IPO stage, and how the specifi
c characteristics of this mechanism such as board composition, executive incentives,
and ownership interests of private equity investors may aff ect the IPO’s performance.
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