Research Notes and Commentaries
Information asymmetry and investor valuation of IPOs: top management team legitimacy as a capital market signal
Article first published online: 11 MAR 2005
Copyright © 2005 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 26, Issue 7, pages 683–690, July 2005
How to Cite
Cohen, B. D. and Dean, T. J. (2005), Information asymmetry and investor valuation of IPOs: top management team legitimacy as a capital market signal. Strat. Mgmt. J., 26: 683–690. doi: 10.1002/smj.463
- Issue published online: 17 MAY 2005
- Article first published online: 11 MAR 2005
- Manuscript Revised: 22 NOV 2004
- Manuscript Received: 12 OCT 2001
- top management team;
- information asymmetry;
- initial public offering;
The condition of information asymmetry between current owners and potential IPO investors creates a context wherein the legitimacy of the top management team (TMT) may serve as a valid signal of value to potential investors. The results confirm our hypotheses that TMT legitimacy is negatively correlated with post-IPO stock value run-up. Our results support a previously unexplored view of the TMT as an important signal of value in IPOs, and suggest that dual benefits accrue to the TMT selection process in IPO firms. Copyright © 2005 John Wiley & Sons, Ltd.