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How Do Founder CEOs Create Value?


  • Acknowledgments: We would like to thank the editor and several anonymous referees for their helpful comments. All errors remain our own.


We examine the value impact of founder CEOs and explore possible mechanisms whereby founder CEOs' unique characteristics affect their firms' value and long-term market performance. We find that founder CEOs' status is positively related to market valuation and long-term stock performance of firms. Furthermore, a lower likelihood of involuntary turnover for founder CEOs is positively associated with market valuation. We also find that CEOs are most likely to generate positive abnormal returns when protected from takeover markets. Our paper suggests that founder CEOs create value by strengthening a firm's stakeholder relationships and alleviating information asymmetry in financial markets, when other certifying entities do not participate in initial public offerings.