Board Characteristics and The Acquisition of Newly Public Firms

Abstract

This study examines the relationship between board characteristics and thelikelihood that newly public firms will be acquired. Drawing upon signaling andagency theory, this study considers the influence of various board characteristics inaddressing the information asymmetry and agency issues faced by potential acquirersof newly public firms. In doing so, this study extends the focus of research on a uniqueform of entrepreneurial harvest, public dual tracking. In order to test study hypotheses,we conducted logistic regression on a sample of 175 newly public firms that underwentinitial public offerings (IPO) in the U.S. during the calendar year of 2007. Study resultsprovide moderate support for study hypotheses. First, no support was found for arelationship between the percentage of outside directors and the likelihood of newlypublic firms being acquired. Second, Chief Executive Officer (CEO) duality was foundto be negatively related to the likelihood of a newly public firms being acquired. Third,opposite the hypothesized effect, study results suggest that the presence of womendirectors is negatively related to the likelihood that newly public firms are acquired.Finally, study results suggest a weak positive relationship between board size and thelikelihood of newly public firms being acquired.