Corporate governance and initial public offerings

Abstract

The study aims to determine how different factors shape the size of boards of directors in private firms conducting an initial public offering (IPO) on the regulated Euronext Paris market. These factors include the presence of a venture capitalist, ownership structure, firm-specific characteristics and CEO characteristics. To study the determinants of board size, we used a sample of 568 firms that went public from 1995 to 2012 and found that the boards tend to become more independent shortly after going public, which indicates that firms are affected by monitoring in financial markets. The study found strong evidence that ownership variables, board structure variables, CEO characteristic variables and firm characteristic variables tend to affect board size. Our results also indicate that venture capitalists are a major catalyst for IPOs because they provide financing and strategic advice, act as an opposing force to the CEO and shape the governance structure.