The Impact of Founder Characteristics on CEO - Succession in UK IPOs.

Abstract

This paper seeks to understand the impact of the company founder’s characteristics on CEO succession for UK firms undertaking an Initial Public Offering (IPO). Previous work considering this issue has been related to large company examples, but there has been significantly less attention placed upon smaller and/or younger companies. This is particularly the case when considering companies that are undertaking the transition from being controlled by their founder during the start-up phase, to becoming public companies that require professional management. This paper focuses upon the factors that determine the choice of a successor, and investigates the importance, and role, of certain founder characteristics that may prove to be influential. To achieve this, the paper considers the implications of a firm passing through the IPO stage, and the pros and cons of having either a founder CEO, or a professional CEO, during this process. The findings indicate that a firm’s leadership structure is not exogenous, and in fact the selection of the founder as CEO following the IPO stage, directly relates to their previous experience, education, and the level of ownership that they retain.