The strategic value of retaining a young entrepreneurial IPO firms original insiders: Applying resource-based view in the Australian IPO context

Abstract

Australia is an ‘Anglo-Saxon’ Pacific-Rim country that has strong features of both relational (Asian) and economic (Anglo) corporate governance. Extending resource-based view (RBV) into this unique context we predict that safeguarding the pre-initial public offering (IPO) top management team (TMT) members and directors (insiders) firm-specific investments by continuing to retain a few insiders even after an IPO is more important than blindly adopting agency-theory US inspired regulations. To test our predictions, we hand collected a sample of young Australian firms to document whether institutional pressures to adopt board independence and replace the founder, or original, pre-IPO insiders by Australian companies negatively impacts post-IPO financial performance. Consistent with our predictions we find the presence of a few of the original insiders significantly improves post-IPO financial performance. These findings contribute to RBV theory and have implications for Asia Pacific corporate governance.