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When the Going Gets Tough: Board Capital and Survival of New Economy IPO Firms

33 Pages Posted: 25 Aug 2008  

Nongnit Chancharat

University of Wollongong

Chandrasekhar Krishnamurti

Auckland University of Technology

Gary Gang Tian

Macquarie University; Financial Research Network (FIRN)

Date Written: August 25, 2008

Abstract

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.

Keywords: Corporate Governance, Survival Analysis, New Economy Sector, Initial Public Offerings

JEL Classification: G32, G33

Suggested Citation

Chancharat, Nongnit and Krishnamurti, Chandrasekhar and Tian, Gary Gang, When the Going Gets Tough: Board Capital and Survival of New Economy IPO Firms (August 25, 2008). 21st Australasian Finance and Banking Conference 2008 Paper. Available at SSRN: https://ssrn.com/abstract=1253171 or http://dx.doi.org/10.2139/ssrn.1253171

Nongnit Chancharat

University of Wollongong ( email )

Australia

Chandrasekhar Krishnamurti

Auckland University of Technology ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

Gary Gang Tian (Contact Author)

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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