Principal Costs in Initial Public Offerings

19 Pages Posted: 26 Jul 2011

See all articles by Thomas Dalziel

Thomas Dalziel

University of Cincinnati - Department of Management

Robert E. White

Cornell University

Jonathan D. Arthurs

Washington State University

Date Written: September 2011

Abstract

The initial public offering (IPO) of a new venture's stock often results in significant changes to the firm's ownership structure. Because firm owners (principals) often have heterogeneous interests, conflicts can arise among the principals. While governance mechanisms are often effective in limiting agency problems, we suggest that principals can also attempt to use governance mechanisms to their own advantage in IPO settings. Specifically, when principal–principal conflict exists, powerful principals may exert control via governance mechanisms to pursue their own interests in ways that create inefficiencies in the form of ‘principal costs’.

Suggested Citation

Dalziel, Thomas and White, Robert E. and Arthurs, Jonathan D., Principal Costs in Initial Public Offerings (September 2011). Journal of Management Studies, Vol. 48, Issue 6, pp. 1346-1364, 2011. Available at SSRN: https://ssrn.com/abstract=1895198 or http://dx.doi.org/10.1111/j.1467-6486.2010.01005.x

Thomas Dalziel (Contact Author)

University of Cincinnati - Department of Management ( email )

United States

Robert E. White

Cornell University ( email )

Ithaca, NY 14853
United States

Jonathan D. Arthurs

Washington State University ( email )

Wilson Rd.
College of Business
Pullman, WA 99164
United States

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