Executive Board Member Financial Expertise and IPO Performance

SYNOPSIS Chief executive officers (CEOs) and chief financial officers (CFOs) can serve on the boards of the firms that employ them. We investigate the effects of having these executive board members, and the effects of their financial expertise (FE), on initial public offering (IPO) outcomes. Specifically, we investigate the effects of three types of executive board member financial expertise: that obtained via prior accounting-based, user-based, and supervisory-based work experience. The results suggest that executive board members with accounting-based experience use their knowledge and experience to decrease information asymmetry at the IPO, leading to lower underpricing. Neither of the other two types of FE helps to improve IPO underpricing. We also find that executive board members with accounting-based experience are associated with shorter IPO preparation times, and less downward IPO offer price adjustments. JEL Classifications: G32; G34; M41.