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

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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.

Keywords: Australia, Corporate Governance, IPO, Insiders, Outsiders, RBV

Authors’ individual contribution: Conceptualization — B.C., D.G., and I.S.; Methodology — B.C., D.G., and I.S.; Software — B.C.; Validation — B.C.; Formal Analysis — B.C., D.G., and I.S.; Investigation — B.C.; Data Curation — B.C.; Writing — Original Draft — B.C., D.G., and I.S.;Writing — Review and Editing — B.C., D.G., and I.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G34, M12

Received: 04.09.2022
Accepted: 24.02.2023
Published online: 28.02.2023

How to cite this paper: Chowdhury, B., Gajurel, D., & Shaikh, I. (2023). The strategic value of retaining a young entrepreneurial IPO firms original insiders: Applying resource-based view in the Australian IPO context. Corporate Ownership & Control, 20(3), 32–52. https://doi.org/10.22495/cocv20i3art2