When the Going Gets Tough: Board Capital and Survival of New Economy IPO Firms
University of Wollongong
Auckland University of Technology
Gary Gang Tian
University of Wollongong - School of Accounting, Economics & Finance; University of Wollongong
August 25, 2008
21st Australasian Finance and Banking Conference 2008 Paper
This study investigates the influence of corporate governance attributes on the likelihood of survival for 127 new economy IPO companies that listed on the ASX between 1994 to 2002. We use survival analysis techniques utilizing the Cox proportional hazards model with three main categories of corporate governance attributes; a) board size, b) board independence and c) ownership concentration. We find that the survival time is negatively related to the percentage holdings of the top 20 shareholders. Our results also suggest that new economy IPO companies with low leverage and small company size are more likely to survive. However, the results indicate that board size and board independence do not explain the survival likelihood of new economy IPO firms. Our results suggest that corporate governance mechanisms that are designed specifically to protect minority shareholders and other providers of external capital are of little value during periods of extreme financial duress.
Number of Pages in PDF File: 33
Keywords: Corporate Governance, Survival Analysis, New Economy Sector, Initial Public Offerings
JEL Classification: G32, G33
Date posted: August 25, 2008
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