An Examination of Board Stability and the Long-Term Performance of Initial Public Offerings

Financial Management, Vol. 32, No. 3, Autumn 2002

Posted: 29 Jul 2003

See all articles by Claire E. Crutchley

Claire E. Crutchley

Auburn University

Jacqueline L. Garner

Georgia Institute of Technology - Scheller College of Business

Beverly B. Marshall

Auburn University Harbert College of Business

Abstract

We study the long-term stock performance of initial public offerings (IPOs). We examine how past performance affects the board of directors' stability and how changes in boards affect subsequent performance. We introduce a dynamic, scale invariant stability metric to measure such changes. Our results indicate that among IPO firms, those with poorer initial performance experience greater board instability and that greater board stability is associated with improvement in subsequent performance. These results indicate that board members leave poorly performing firms, rather than shareholders replacing ineffective boards. Retaining boards that experience initial good performance is associated with continued success.

Suggested Citation

Crutchley, Claire E. and Garner, Jacqueline L. and Marshall, Beverly B., An Examination of Board Stability and the Long-Term Performance of Initial Public Offerings. Financial Management, Vol. 32, No. 3, Autumn 2002. Available at SSRN: https://ssrn.com/abstract=321942

Claire E. Crutchley (Contact Author)

Auburn University ( email )

415 West Magnolia Avenue
303 Lowder Business Building
Auburn, AL 36849
United States
334-844-3002 (Phone)
334-844-4960 (Fax)

Jacqueline L. Garner

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Beverly B. Marshall

Auburn University Harbert College of Business ( email )

415 Magnolia Ave.
Auburn, AL 36849
United States

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