Founder as Steward or Agent? A Study of Founder Ownership and Firm Value
Alexandra Dawson, Imants Paeglis, Nilanjan Basu
Entrepreneurship Theory and Practice · 2018 · Volume 42 · Issue 6
Abstract
This study addresses the relationship between founder ownership and firm value in young and entrepreneurial businesses. We argue that a stewardship effect prevails when founders have low or high levels of ownership while an agency effect prevails at intermediate levels. Using a dataset of 1,269 firms with 11,645 firm-year observations, we find support for our hypothesis that there is a convex relationship between founder ownership and firm value. The agency effect at intermediate founder ownership is consistent with evidence indicating that these firms display lower leverage, greater unrelated diversification, and higher disproportionate board representation.
Keywords
firm value, founder, public firm, agency theory, stewardship theory
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