CEO Dismissal in Venture Capital-Backed Firms: Further Evidence from an Agency Perspective

Garry D. Bruton · Vance H. Fried · Robert D. Hisrich

76 citations0/0 files storedEntrepreneurship Theory and Practice

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Private Equity and Venture Capital Corporate Finance and Governance Entrepreneurship Studies and Influences

Abstract

This study uses agency theory to examine CEO dismissal in venture capital-backed firms. Prior applications of agency theory have focused on reducing managerial opportunism by aligning the interests of manager with owner. Unlike large, mature firms, venture capital-backed companies feature high levels of CEO stock ownership. In this environment, we find that the primary reason for CEO dismissal is lack of agent ability, followed by good faith disagreements between principal and agent, with managerial opportunism ranking last. Further, we find that CEOs dismissed for opportunism owned more stock than those dismissed for other reasons.

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References

1983Separation of Ownership and Control 1989Agency Theory: An Assessment and Review 1977Estimating Nonresponse Bias in Mail Surveys 1984Upper Echelons: The Organization as a Reflection of Its Top Managers 1984Upper Echelons: The Organization as a Reflection of Its Top Managers 1988Management ownership and market valuation 1990Additional evidence on equity ownership and corporate value 1984Measuring organizational performance in the absence of objective measures: The case of the privately‐held firm and conglomerate business unit

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