CEO Dismissal in Venture Capital-Backed Firms: Further Evidence from an Agency Perspective

Abstract

This study uses agency theory to examine CEO dismissal in venture capital-backed firms. Prior applications of agency theory have focused on reducing managerial opportunism by aligning the interests of manager with owner. Unlike large, mature firms, venture capital-backed companies feature high levels of CEO stock ownership. In this environment, we find that the primary reason for CEO dismissal is lack of agent ability, followed by good faith disagreements between principal and agent, with managerial opportunism ranking last. Further, we find that CEOs dismissed for opportunism owned more stock than those dismissed for other reasons.