Executive Board Member Financial Expertise and IPO Performance

43 Pages Posted: 13 Oct 2013 Last revised: 23 Mar 2019

See all articles by Michael Ettredge

Michael Ettredge

University of Kansas - Accounting and Information Systems Area

Chan Li

University of Kansas

Qian Wang

Iowa State University - College of Business

Yang Xu

University of Colorado Colorado Springs

Date Written: March 19, 2019

Abstract

This study investigates the effects on initial public offering (IPO) outcomes of the existence and type of financial expertise of chief executive officers (CEOs) and chief financial officers (CFOs) serving on their own IPO firms’ boards. For brevity we refer to these executives as executive board members. We investigate the effects of three types of executive board member financial expertise: that obtained via accounting-based, user-based, and supervisory-based work experience. The results suggest that executive board members having accounting-based experience appear to use that knowledge and experience to decrease information asymmetry at IPO, leading to lower underpricing of initial offerings. Neither of the other two types of financial expertise for executive board members helps to improve IPO underpricing. We also find that executive board members with accounting-based experience are associated with shorter IPO preparation times, and less downward IPO offer price adjustments. Our study suggests that IPO firms experience benefits when executives having accounting expertise serve on their boards.

Keywords: Initial Public Offering, IPO, Underpricing, Financial Expertise, Corporate Governance

JEL Classification: M4, G3

Suggested Citation

Ettredge, Michael L. and Li, Chan and Wang, Qian and Xu, Yang, Executive Board Member Financial Expertise and IPO Performance (March 19, 2019). Available at SSRN: https://ssrn.com/abstract=2339276 or http://dx.doi.org/10.2139/ssrn.2339276

Michael L. Ettredge

University of Kansas - Accounting and Information Systems Area ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States
785-864-7537 (Phone)
785-864-5328 (Fax)

Chan Li

University of Kansas ( email )

Capitol Federal Hall
Lawrence, KS 66045
United States
7857661277 (Phone)
66045 (Fax)

Qian Wang

Iowa State University - College of Business ( email )

Ames, IA 50011-2063
United States

Yang Xu (Contact Author)

University of Colorado Colorado Springs ( email )

1420 Austin Bluffs Pkwy
Colorado Springs, CO 80920
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
209
Abstract Views
1,558
rank
145,599
PlumX Metrics