Information asymmetry and investor valuation of IPOs : top management team legitimacy as a capital market signal
By: COHEN, Boyd D
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Contributor(s): DEAN, Thomas J.
Material type: 
ArticlePublisher: UK : Wiley, July 2005Subject(s): Top management team | Information asymmetry | Initial public offering | SignalingStrategic Management Journal 26, 7, p. 683 - 690Abstract: The condition of information asymmetry between current owners and potential IPO investors creates a context wherein the legitimacy of the top management team (TMT) may serve as a valid signal of value to potential investors. The results confirm our hypotheses that TMT legitimacy is negatively correlated with post-IPO stock value run-up. Our results support a previously unexplored view of the TMT as an important signal of value in IPOs, and suggest that dual benefits accrue to the TMT selection process in IPO firms.
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The condition of information asymmetry between current owners and potential IPO investors creates a context wherein the legitimacy of the top management team (TMT) may serve as a valid signal of value to potential investors. The results confirm our hypotheses that TMT legitimacy is negatively correlated with post-IPO stock value run-up. Our results support a previously unexplored view of the TMT as an important signal of value in IPOs, and suggest that dual benefits accrue to the TMT selection process in IPO firms.
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