Board Dynamics Over the Startup Lifecycle

60 Pages Posted: 13 Jul 2020 Last revised: 5 Aug 2020

See all articles by Michael Ewens

Michael Ewens

California Institute of Technology - Division of the Humanities and Social Sciences; National Bureau of Economic Research (NBER)

Nadya Malenko

University of Michigan, Stephen M. Ross School of Business; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: July 18, 2020

Abstract

Venture capital (VC) backed firms face neither the governance requirements nor a major separation of ownership and control of their public peers. These differences suggest that independent directors could play a unique role on private firm boards. This paper explores the dynamics of VC-backed startup boards using new data on board member entry, exit, and individual director characteristics. We document several new facts about board size, the allocation of control, and composition dynamics. At formation, a typical board has four members and is entrepreneur-controlled. Independent directors are found on the median board after the second financing event, when control over the board becomes shared, with independent directors holding the tie-breaking vote. These patterns are consistent with independent directors playing both a mediating and advising role over the startup lifecycle, and thus representing another potential source of value-add to entrepreneurial firm 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 Lifecycle (July 18, 2020). European Corporate Governance Institute – Finance Working Paper No. 687/2020, Available at SSRN: https://ssrn.com/abstract=3640898 or http://dx.doi.org/10.2139/ssrn.3640898

Michael Ewens (Contact Author)

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nadya Malenko

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
39
Abstract Views
226
PlumX Metrics