Board Dynamics Over the Startup Life Cycle

60 Pages Posted: 13 Jul 2020 Last revised: 13 May 2024

See all articles by Michael Ewens

Michael Ewens

Columbia Business School; National Bureau of Economic Research (NBER)

Nadya Malenko

Boston College, Carroll School of Management; National Bureau of Economic Research (NBER); Finance Theory Group (FTG); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: May 9, 2024

Abstract

We explore the dynamics of venture capital (VC)-backed startup boards using novel data on director entry, exit, and characteristics. At formation, a typical board is entrepreneur-controlled. Independent directors join the median board after the second financing and hold a tie-breaking vote. Their presence is particularly likely when potential VC-entrepreneur conflicts are larger. At later stages, control switches to VCs and independent director characteristics change. These patterns align with key financial contracting theories, but also highlight unique roles of independent directors over the life cycle: mediation followed by advising. Independent directors thus represent another potential source of value-add to startup performance.

Keywords: venture capital, board of directors, corporate governance, independent directors, mediation

JEL Classification: G24,G34

Suggested Citation

Ewens, Michael and Malenko, Nadya, Board Dynamics Over the Startup Life Cycle (May 9, 2024). European Corporate Governance Institute – Finance Working Paper No. 687/2020, Olin Business School Center for Finance & Accounting Research Paper No. Forthcoming, Available at SSRN: https://ssrn.com/abstract=3640898 or http://dx.doi.org/10.2139/ssrn.3640898

Michael Ewens (Contact Author)

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Nadya Malenko

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