Narrow Results

Extant studies and my own work show that in US listed corporations, the presence of a firm’s founder adds value to the firm. The incremental value increases with the extent of decision rights controlled by the founder. Furthermore, the value addition is higher if the founder CEO is younger at the time of the initial public offering and decreases with the founder’s tenure in the firm. Further investigation reveals that the founders add value by improving operating performance and being more transparent than similar non-founder firms. Moreover, the founders are more focused on the strategic positioning of the firm in improving operating performance — they improve profit margins in differentiated firms while improving efficiency in firms with cost-leadership strategy. Analysts and investors can benefit by incorporating these insights into their analysis.