Founder Retention as CEO at IPO in Emerging Economies: The Role of Private Equity Owners and National Institutions

54 Pages Posted: 30 Mar 2022

See all articles by Bruce Allen Hearn

Bruce Allen Hearn

University of Southampton; University of Bradford - School of Management

Igor Filatotchev

City University London - The Business School

Date Written: February 9, 2019

Abstract

We integrate the institutional perspective with research on the governance role of private equity firms in an investigation of Founder-CEO successions in Initial Public Offerings (IPOs) in emerging markets. Using a unique, hand-collected and comprehensive sample of 191 firms having undertaken IPOs in 21 markets across the African continent between January 2000 and August 2016, we apply instrumental variable (IV) Probit methodology and find that higher levels of private equity ownership are positively associated with the probability of the founder’s retention as CEO, especially in the context of low-quality formal institutions. Further, in societies with high tribalism, higher private equity ownership is associated with an increased likelihood of founder retention. Voids in the institutional architecture underscore the importance of the founder as a key organizational resource for the firm and a source of institutionalized legitimacy, which in turn confers on the firm an ability to access required resources.

Keywords: IPO; Africa; Founder-CEOs; Institutions; Entrepreneurship

Suggested Citation

Hearn, Bruce Allen and Filatotchev, Igor, Founder Retention as CEO at IPO in Emerging Economies: The Role of Private Equity Owners and National Institutions (February 9, 2019). Journal of Business Venturing, Vol. 34, No. 3, 2019, Available at SSRN: https://ssrn.com/abstract=4030687

Bruce Allen Hearn (Contact Author)

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

University of Bradford - School of Management ( email )

Emm Lane
Bradford, West Yorkshire Bd9 4JL
United Kingdom

Igor Filatotchev

City University London - The Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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