The impact of CEO founder and CEO age on new ventures performance: A quantile regression analysis for U.S. IPOs

Abstract

Using quantile regression, we compare the relationship between CEO founder and CEO age and the performance of new firms in the US. Our empirical evidence shows that issuers led by a CEO founder have a strong positive impact on first-day returns, especially at the intermediate level of underpricing, while underpricing declines as CEO age increases, especially above the 40th percentile, which would not be confirmed by a classical linear regression. This finding suggests that estimating the different quantile effects of a response variable may be more informative than estimating only the average effect of the response variable. In addition, CEO founders exacerbate uncertainty about issuer quality with firm expansion; and in large firms, mature CEOs perform better than young ones in reducing the first trading day return; the mature CEO has a strong negative impact on initial returns only in low-R&D firms, and the CEO founder has a significant positive association with underpricing in R&D-intensive firms.