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Board financial expertise and IPO performance: An analysis of U.S. public offerings and withdrawals
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Marvin Nipper 
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
Potential investors examine governance characteristics prior to an initial public offering (IPO) to assess the quality and prospects of the issuing firm. One important governance characteristic is board financial expertise, as it provides directors with the relevant knowledge for an IPO process and is valuable for the board’s monitoring duties. Therefore, the purpose of this paper is to examine whether and how board financial expertise affects IPO outcomes. To do so, I employ a sample of 414 completed and 85 withdrawn IPOs that were filed from 2014–2017 at NYSE or NASDAQ. I document that the ratio of directors with financial expertise on the board is negatively associated with the level of underpricing and the probability of IPO withdrawal. The results suggest that particularly outside directors with financial expertise have a positive signaling effect and help to reduce information asymmetry around initial public offerings. Above that, using quantile regression, I find that director financial expertise is most valuable for issuances with high levels of investor uncertainty. Therefore, this study makes important contributions to the corporate governance and IPO literature by providing a comprehensive analysis of the effects of board financial expertise on IPO outcomes.
Keywords: Initial Public Offerings, Underpricing, Board Composition, Board of Directors, Financial Expertise
Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.
Declaration of conflicting interests: The Author declares that there is no conflict of interest.
JEL Classification: G12, G14, G34
Received: 12.03.2021
Accepted: 14.05.2021
Published online: 18.05.2021
How to cite this paper: Nipper, M. (2021). Board financial expertise and IPO performance: An analysis of U.S. public offerings and withdrawals [Special issue]. Corporate Ownership & Control, 18(3), 307–324. https://doi.org/10.22495/cocv18i3siart6
