Founder CEOs and IPO Underpricing

Sammanfattning: The purpose of this thesis is to analyze the impact on underpricing from having a founder as CEO when doing an Initial Public Offering. We also perform a descriptive analysis on the Swedish IPO market, examining the differences between founder-led firms and companies with professional managers. Our sample includes 82 Swedish companies going public 1999 - 2008. We find few significant differences in characteristics between these groups, except for the amount of retained equity by CEOs and the venue of listing. When testing four our full sample we find that having a founder as CEO has no significant impact on underpricing from having a founder as CEO. For large firms, founder CEOs also seem to have no significant impact on underpricing. However, for small firms, companies with founder CEOs experienced increased underpricing at a 5 percent significance level. Our findings suggest that having a founder as CEO does not work as a signal to reduce ex-ante uncertainty among investors, either because they pay no attention to founder status or because they perceive founder CEOs as increasing uncertainty of a firm’s intrinsic value.