At the 2015 AOM conference in Vancouver, Asma Fattoum’s PhD thesis entitled “Three essays on the Rich vs. King dilemma faced by Founder CEOs at IPO” was selected by members of the Research Committee of the Academy of Management’s BPS Division to be one of six finalists for the 2015 Wiley Blackwell Award for Outstanding Dissertation Research in Business Policy and Strategy.
The thesis comprises three essays that investigate the king versus rich dilemma confronting founder-CEOs at IPO. Indeed, IPOs dilute founder-CEOs’ cash-flow rights, which may weaken their control over the firm. To prevent any loss of control, founder-CEOs can put in place defensive mechanisms such as dual-class shares, pyramid control structures and voting pact agreements. However, because defensive mechanisms may create opportunities for principal-principal agency costs, founder-CEOs implementing defensive mechanisms are likely to suffer financial penalties at IPO. Hence, founder-CEOs face a dilemma at IPO: Either (1) select the king alternative by putting in place defensive mechanisms and suffering financial penalty or (2) choose the rich alternative by not using defensive mechanisms and risking loss of control over the firm but securing higher firm valuation at IPO. This dilemma raises several theoretical and empirical questions, that I investigate respectively in three related essays: (1) the factors that make the king option more likely to be selected (2) The consequences of the king and rich alternatives on founder-CEOs wealth on the first days of IPO trading and (3) the long-term implications of the king and rich alternatives on founder-CEOs’ turnover, financial wealth as well as on firm dividend policy.
Go to Asma Fattoum’s website to find out more.