Executive compensation and firm performance: A life cycle study of United States initial public offerings.

摘要

An initial public offering (IPO) transforms an organization into an independent, publicly held entity with a new array of governance, operating, and reporting requirements. This study focuses on two types of United States IPO firms differentiated by their origin. "Greenfield" companies are firms that were start-ups or privately held before their going public. "Heritage" companies are those that were formally part of a pre-existing public company prior to the IPO event. This study examines the effect of an IPO's origin on risk, chief executive officer (CEO) compensation, and organizational performance.; The study finds that Greenfield firms are riskier than Heritage companies at the time of the IPO event. Greenfield CEOs also have lower total compensation during the fiscal year prior to the offering. As expected, among Greenfield firms, the number of uses of IPO proceeds is inversely correlated with the proportion of total compensation paid in stock options. However, two of three risk variables in Greenfield firms---the number of risk factors listed in the IPO registration statements and the reported profitability of the firm during the prior fiscal year---actually exhibit positive associations. Among Heritage firms, no associations exist among any of these risk metrics and the percentage of total CEO compensation paid in stock options.; Greenfield firms are believed to be younger and more entrepreneurial than Heritage firms. However, the hypothesis that Greenfield firms will have a higher proportion of total compensation paid in stock options is not supported. For both Greenfield and Heritage firms, this study also finds no linear relationship between the dependent variable of benchmarked organizational performance during the first year of public company life and the independent variables of firm risk at the time of the IPO event and the size and structure of CEO compensation during the fiscal year prior to the offering date.; This study offers new perspective on risk, CEO compensation, and firm performance in U.S. initial public offerings. One of a limited set of scholarly research of IPO firms differentiated by their origin, the study provides both methodological and empirical support for additional research of newly public companies.