Top management team and IPO firms’ acquisition activity

Abstract

Purpose

The purpose of this paper is to explore the role of the top management team (TMT) in determining whether IPO firms in high-tech industry will engage in acquisitions during the post-IPO period.

Design/methodology/approach

The authors collect IPO and TMT data from firm prospectuses, and acquisition and financial data from Securities Data Company Platinum and Compustat, respectively. Poisson regression analysis is applied to test the effect of TMT characteristics on acquisition activity.

Findings

Using 135 IPO firms, the authors find evidence that TMT composition directly influences acquisition activity of IPO firms during the post-IPO period. Specifically, the authors find that TMT experience serving as members other firms’ boards and TMT experience in senior level management positions are both positively associated with acquisition activity. TMTs with prior IPO experience and TMTs with longer organizational tenures are negatively associated with acquisition activity.

Originality/value

This study is among the first to examine the impact of TMT demography on newly public firms’ acquisition activity. In doing so, it adds meaningfully to the understanding of the factors driving such firms’ strategic behavior.

Citation

Mousa, F.T., Kim, S.K. and Rutherford, M.A. (2016), "Top management team and IPO firms’ acquisition activity", Management Decision, Vol. 54 No. 3, pp. 664-682. https://doi.org/10.1108/MD-02-2015-0059