Wealth and the effects of founder management among IPO-stage new ventures



IPO underpricing is inherently related to both wealth retention and wealth creation. This paper reviews the relationship between IPO underpricing and wealth, then presents the results of an empirical study of the impact of CEO founder status (i.e., is the CEO also the founder?) on IPO underpricing. Results based on data collected from 368 IPO-stage new ventures suggest that founder management has a positive impact on IPO underpricing, and that the founder management–underpricing relationship is moderated by (a) the IPO market share of the investment banker employed and (b) the proportion of insiders on the IPO firm's board of directors. Copyright © 2001 John Wiley & Sons, Ltd.