The Impact of TMT Board Member Control and Environment on Post-IPO Performance

Abstract

We draw on theories of entrepreneurial firms to explore the impact of top management team (TMT) board control on holding period returns (HPRs). We posit a complex relation between a firm's performance after initial public offering (IPO) and the proportion of TMT members on its board. HPRs increased modestly as TMT board membership rose to 50 percent, increased dramatically as it rose from 50 to 75 percent (the “optimal” range), and decreased materially as it rose beyond 75 percent. Further, environmental conditions influenced the focal relationship, in some cases in unpredictable ways, even when TMT board control was optimal.