Abstract
This paper contributes to the ongoing debate on the relationship between equity ownership and firm value. Based on a unique longitudinal dataset of 1,442 newly public firms, which we followed over a period of up to 12 years after initial public offering, we find that an entrenchment effect prevails at low–to–intermediate levels of founder ownership whereas a convergence of interest effect prevails at intermediate–to–high levels of founder ownership. These effects are associated with a convex relationship between the ownership held by the founder and firm value. We also find that the relationship between founder ownership and firm value is positively moderated by the presence of cofounders, whose presence is generally associated with higher value.
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