Asma Fattoum a soutenu sa thèse de doctorat le lundi 7 avril 2014. Sa thèse s’intitule: « Roi ou Riche: Trois essais sur les dilemmes des PDG fondateurs lors d’une introduction en bourse ». Le titre original est: “Three Essays on the King Versus Rich Dilemma Faced by Founder-CEOs at IPO“.
Le comité de thèse se composait de:
- Frederic Delmar (Principal Advisor, Lunds Universitet, Sweden),
- Pierre-Yves Gomez (Chair, EMLYON Business School),
- Garry Bruton (External Examiner, Texas Christian University, USA),
- Mike Wright (External Examiner, Imperial College, UK)”.
Cette thèse comprend trois essais qui examinent le dilemme « Roi ou Riche » auquel fait face le fondateur-PDG lors d’une introduction en bourse. En effet, une introduction en bourse dilue les droits de propriété des fondateurs-PDG, ce qui peut affaiblir leur contrôle sur l’entreprise. Pour éviter toute perte de contrôle, les fondateurs-PDG peuvent mettre en place des mécanismes de défense tels que des actions à deux paliers, des structures de contrôle de la pyramide et des pactes-accords de vote. Toutefois, puisque les mécanismes de défense peuvent créer des coûts d’agence et une latitude plus grande pour empiéter sur les droits des nouveaux actionnaires, les mécanismes de défense mis en place par les PDG-fondateurs sont susceptibles de faire l’objet de sanctions financières lors de l’introduction. Ainsi, le PDG-fondateur fait face à un dilemme: soit (1) choisir la solution du roi en mettant en place des mécanismes de défense et subir des pénalités financières ou (2) choisir la solution du riche en n’utilisant pas les mécanismes de défense au risque de perdre le contrôle de l’entreprise mais en assurant une meilleur évaluation financière de l’entreprise lors de l’introduction.
This 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 and discretion for private benefits expropriation, 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.
In the first essay, I investigate whether founder-CEOs are more inclined than non- founder-CEOs to choose the king alternative. I also examine whether firm age, firm size and venture capital voting power influence founder-CEOs predisposition to prefer the king over the rich alternative. Relying on the literature highlighting founders’ intrinsic and extrinsic specific attributes as well as their emotional biases, I suggest that founder-CEOs are more likely than non-founder CEOs to prefer the king alternative at IPO. I also suggest that firm age and firm size positively impact the use of defensive mechanisms in firms led by founder- CEOs. In contrast, I suggest that venture capital and private equity shareholders are likely to resist implementation of such mechanisms. I test hypotheses empirically using the full population of 467 firms that went public over the period 1992-2010 in France. Findings show that founder-CEOs are more likely than other CEOs to choose the king alternative rather than the rich alternative and that venture capital and private equity investors oppose defensive mechanisms implementation. In contrast, results indicate that founder-CEOs’ propensity to opt for the king alternative is not influenced by firm age and firm size.
In the second essay, I examine whether the king and rich alternatives are mutually exclusive at IPO. In particular, I assess whether the king alternative necessarily leads founder- CEOs to leave money on the table at IPO. I also investigate whether founder-CEOs who choose the king alternative can successfully use affiliation with reputable underwriters and agreement on restrictive share lockups as credible signals to reduce the financial penalty incurred at IPO date. Building upon principal-principal agency theory, I argue that the king alternative produces a significant financial penalty because defensive mechanisms exacerbate adverse selection and moral hazard problems at IPO. Moreover, drawing on signaling theory I suggest that greater underwriter reputation and more restrictive share lockup conditions lower the financial penalty suffered by founder-CEOs selecting the king alternative. I test hypotheses empirically using the full population of 287 founder-CEO led firms that went public over the period 1992-2010 in France. Results show that the king and rich alternatives are mutually exclusive at IPO date. Founder-CEOs who adopt the king position suffer considerable financial penalties at IPO. Furthermore, affiliation with reputable underwriters and agreement on restrictive lockups do not constitute sufficiently credible signals to mitigate those financial penalties at IPO.
In the third essay, I address three aspects of the long-term consequences of the king versus rich dilemma faced by founder-CEOs. First, I examine whether founder-CEOs who choose the king alternative by putting in place defensive mechanisms at IPO are actually experiencing fewer non-voluntary turnover events than founder-CEOs who choose the rich alternative. Second, I assess whether financial penalties suffered at IPO by founder-CEOs who choose the king alternative persist in the long-term post-IPO. Finally, I explore the effects of the king versus rich choice on firm dividend policy. Drawing on a panel data set that includes 287 IPO firms led by founder-CEOs over the period 1992-2010 in France, I show that the higher the number of defensive mechanisms implemented by founder-CEOs, the less likely they will experience non-voluntary turnover event post-IPO. Moreover, in line with stewardship theory arguments I found that the negative effect of defensive mechanisms on firm valuation observed at IPO date shifts progressively and becomes positive in the long- term post-IPO. More importantly, I found that founder-CEOs who select the king alternative are able to largely recover over the long run money left on the table at IPO date, and hence, they can achieve the king and rich outcomes sequentially over time. Finally, in agreement with stewardship theory expectations I found that firms led by founder-CEOs who select the king alternative exhibit lower dividend payout than other firms.
In sum, the results of this dissertation contribute to entrepreneurship and corporate governance research investigating the consequences of founders’ emotional biases on their strategic choices and personal wealth. In particular, this dissertation does confirm that founder-CEOs exhibit idiosyncratic behavior when their control over the firm is at risk. When a founder-CEO faces the king versus rich dilemma that involves (1) a high degree of control using defensive mechanisms, but important short-term economic loss resulting from high underpricing and low price premiums; and (2) no defensive mechanisms against dilution of control, but higher IPO valuation, the striking winner is the king choice. In contrast, when a non-founder CEO is confronted by the king versus rich dilemma, s/he is more likely than a founder-CEO to choose the rich course of action. Moreover, this dissertation confirms that founder-CEOs exhibit stewardship behavior in the long-term, even in situations where their king posture allows them to easily extract private benefits. Evidence of higher price to book ratios for firms in which control is locked by founder-CEOs using several defensive mechanisms suggests that founder-CEOs do not use such devices to extract private benefits but instead use them to implement long-term value maximization strategies. This stewardship behavior enables founder-CEOs who choose the king alternative to recover in the long-run money they left on the table at IPO.