Strategically camouflaged corporate governance in IPOs: Entrepreneurial masking and impression management |
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| Institution: | 1. Marriott School, Brigham Young University, Provo, UT 84604, United States;2. Harmon College of Business and Professional Studies, University of Central Missouri, United States;3. Trulaske College of Business, University of Missouri, Columbia, MO 65211, United States;1. Department of Management Programs, Florida Atlantic University, 313 Fleming Hall, 777 Glades Rd., Boca Raton, FL 33431, USA;2. IZA, Bonn, Germany;3. Department of Economics, Boston College, 140 Commonwealth Ave, Chestnut Hill, MA 02467-3806, USA;1. Robert A. Foisie School of Business, Worcester Polytechnic Institute, 100 Institute Road, Worcester, MA 01609-2280, United States;2. Department of Marketing and Entrepreneurship, College of Business Administration, Kent State University, P.O. Box 5190, Kent, OH 44242-0001, United States;1. Department of Management, Hankamer School of Business, Baylor University, United States;2. Department of Management and Entrepreneurship, Kelley School of Business, Indiana University, United States;3. Initiative for Studies in Transformational Entrepreneurship, Wisconsin School of Business, University of Wisconsin, United States;1. Texas Christian University, Neeley School of Business, TCU Box 298530, Fort Worth, TX 76129, USA;2. Concordia University, John Molson School of Business , 1450 Guy St, Montreal, QC H3H 0A1, Canada;1. Management Studies, Wageningen University, Hollandseweg 1, 6706 KN, De Leeuwenborch (Building 201), Room 5063, Wageningen, Netherlands;2. Department of Agricultural and Applied Economics, University of Missouri, 125 A, Mumford Hall, Columbia, MO 65211, USA;3. New Analytics LLC and Hutton School of Business, University of the Cumberlands, Williamsburg, KY 40769, USA;1. York University, Schulich School of Business, Department of Entrepreneurship, Toronto, ON M3J 1P3, Canada;2. Oklahoma State University, Spears School of Business, Department of Entrepreneurship, Stillwater, OK 74078, USA;3. Miami University, Farmer School of Business, Department of Entrepreneurship, Oxford, OH 45056, USA;4. The Ohio State University, Fisher College of Business, Department of Management & Human Resources, Columbus, OH 43210, USA |
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| Abstract: | Entrepreneurs attempt to persuade potential investors that their new ventures are both credible and worthy of funding. A long line of research on entrepreneurial impression management establishes that the ability to present their ventures in a favorable light is a key attribute of successful entrepreneurs. In this study, we examine the opposite side of the issue and test to determine if some entrepreneurs obscure corporate governance information. We create a new metric to measure the level of camouflage used in governance documents for initial public offerings (IPOs). We find that entrepreneurs are less likely to use camouflage during periods of high scrutiny, as measured by industry analyst following, industry concentration levels, and IPO clustering. We also find that greater use of camouflage is associated with raising more capital, due to both greater offer proceeds as well as less underpricing. This effect is most pronounced in corporate charters which are difficult for shareholders to change. |
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