Multiple Founders and Firm Value

35 Pages Posted: 5 Nov 2011 Last revised: 2 Oct 2012

En-Te (John) Chen

Queensland University of Technology; Financial Research Network (FIRN)

Stephen Gray

University of Queensland - Business School; Duke University - Fuqua School of Business; Financial Research Network (FIRN)

John Nowland

City University of Hong Kong

Date Written: November 3, 2011

Abstract

In this paper, we highlight the existence of multi-founder firms, which were founded by multiple individuals (with no family connections) who are still actively involved in the firm as directors and/or managers (e.g., Google and Yahoo). These firms provide a unique setting to determine whether the involvement of multiple founders provides shareholders with incremental benefits over other firms. Our analysis indicates that multi-founder firms are more valuable than all other types of firms, including single-founder firms and family firms, with the valuation premium positively related to the number of founders involved in the firm. Further analysis confirms that this valuation premium is linked to the direct involvement of the multiple founders as chairmen, CEOs, directors and managers, and not other uncontrolled factors. Our results also suggest that shareholders benefit more when founders are involved at the board level, rather than in non-CEO executive positions.

Keywords: founders, multiple founders, multi-founder firms, ownership, value

JEL Classification: G32, G34

Suggested Citation

Chen, En-Te (John) and Gray, Stephen and Nowland, John, Multiple Founders and Firm Value (November 3, 2011). Pacific-Basin Finance Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1954251 or http://dx.doi.org/10.2139/ssrn.1954251

En-Te Chen

Queensland University of Technology ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia
61-7-3864-2658 (Phone)
61-7-3864-1500 (Fax)

Financial Research Network (FIRN)

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

HOME PAGE: http://www.firn.org.au

Stephen Gray

University of Queensland - Business School ( email )

University of Queensland
Brisbane, Queensland 4072
Australia

Duke University - Fuqua School of Business

Box 90120
Durham, NC 27708-0120
United States

Financial Research Network (FIRN) ( email )

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

John Nowland (Contact Author)

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

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