This paper focuses on the impact of founder transitions in initial public offering firms. We examine transitions where the founder remains as CEO, stays in the top management team or on the board of directors, or is not in the firm anymore. We then test the model using 210 IPO firms with SIC codes in the range 7000-8999 that went public between 2000 and 2012. As robustness test, we divide the sample into IPO listings from 2000-05 and 2006-12, and differentiate between laddering vs. non-laddering related litigation, lawsuits for accounting reasons vs. non-accounting reasons, and dismissed vs. non-dismissed cases. The results suggest that firms tend to obtain higher valuations when they have professional managers. After three years, however, having the founder remain as CEO will be associated with a higher failure rate compared to having the founder leave the firm. In addition, within three years after the IPO, when a founder moves to a non-CEO role on the top management team or the board, the firms are less likely to face a lawsuit.