The role of founder decision rights and operating and disclosure mechanisms in firm value creation

Abstract

We find that founder firms use operating performance and transparency as mechanisms more effectively than non-founder firms for creating value. The greater effectiveness comes from the founders choosing their inputs strategically. Specifically, they increase the gross margin in differentiated firms that demand organizational agility and they increase asset usage efficiency in cost‑leadership firms. Founder firms exhibit higher transparency than non-founder firms in differentiated and cost leadership firms. The improvements in operational performance, transparency, and value are all greater when founders have more decision rights. Our results are consistent with the interpretation that influential founders use organizational performance and transparency to increase the firm value more effectively than managers of similar non-founder firms by providing a unified vision and a single point of control.