Agency costs, ownership structure, and corporate governance in pre-and post-IPO firms

Abstract

Following the approach in Ang, Cole, and Lin (2000), we estimate the impact of CEO ownership on agency costs in pre-IPO firms and again in the post-IPO period when they have become publicly traded companies. We find that CEO ownership is large in both the pre and post-IPO firms. Greater CEO ownership is associated with lower agency costs both before and after the IPO, and CEO ownership in these firms seems to dominate all other agency control mechanisms. Board composition and involvement by venture capital firms does not appear to mitigate agency costs.