Abstract

Research Question/Issue: Building on prior work on the relationship between founder ownership and firm value in young public firms, we test the moderating influence of the presence of cofounders, distinguishing between dyads and teams of three or more founders.

Research Findings/Insights: We test our hypotheses on a unique sample of 7,162 observations from 959 US firms that have been public for less than 20 years and retained their founders. We show that the presence of one or more cofounders has distinct moderating effects on the relationship between main founder ownership and firm value, depending on the number and relative ownership power of the founders. Firm value benefits the most when there is ownership power symmetry in dyads of founders and ownership power asymmetry in teams of three or more founders.

Theoretical/Academic Implications: We make two contributions to the corporate governance literature. First, we take a more nuanced look at founders and their ownership power in young public firms and show that the presence of cofounders has an effect on firm value. Second, we show that this effect depends on the number of founders and on whether there is ownership power symmetry or asymmetry among founders. Overall, our study supports the view that founders continue to matter even after IPO.

Practitioner/Policy Implications: By shedding light on the effect of founders retaining ownership power on firm value after IPO, our findings may guide founders in their decisions to exit their business fully or partially and investors in their decisions whether to invest in public firms that retain their founders.