The best of both worlds: Can founder-CEOs overcome the rich versus king dilemma after IPO?

Research Summary: To prevent loss of control post-IPO, founder-CEOs can implement control-enhancing mechanisms disconnecting ownership from voting rights. However, this decision places them in a rich versus king dilemma. If they choose to implement such mechanisms and secure the king position, they risk losing money at IPO. If they choose not to implement control-enhancing mechanisms and adopt the rich position they risk losing control over the firm. We investigate theoretically and empirically the outcomes of this dilemma in a multiperiod setting (at IPO and post-IPO). We found that the majority of founder CEOs who choose the king option recover initial wealth loss, and hence, they can reconcile the rich and king paths in the long-run post-IPO.

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