Abstract

This study compares performance for founder-managed firms and professional-managed firms by analyzing 138 Canadian IPO firms which went public from 2004 to 2013. In this paper, we measure firm performance in two ways: Tobin’s Q and ROA are used to measure a firm’s financial performance, while firm survival status is used as a supplementary performance measure. We find that founder-managed firms underperform and underlive its counterparts when firm performance is measured by Tobin’s Q and survival status. But founder status is proved to be unrelated with ROA. The negative influence of founder status can be explained by Relevant Transaction Hypothesis which states that founder-managers may act for the controlling family and are more concerned with its associated private income stream than with maximizing the value of the firm.