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Information asymmetry and investor valuation of IPOs: top management team legitimacy as a capital market signal


  • Boyd D. Cohen
  • Thomas J. Dean


The condition of information asymmetry between current owners and potential IPO investors creates a context wherein the legitimacy of the top management team (TMT) may serve as a valid signal of value to potential investors. The results confirm our hypotheses that TMT legitimacy is negatively correlated with post‐IPO stock value run‐up. Our results support a previously unexplored view of the TMT as an important signal of value in IPOs, and suggest that dual benefits accrue to the TMT selection process in IPO firms. Copyright © 2005 John Wiley & Sons, Ltd.

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  • Boyd D. Cohen & Thomas J. Dean, 2005. "Information asymmetry and investor valuation of IPOs: top management team legitimacy as a capital market signal," Strategic Management Journal, Wiley Blackwell, vol. 26(7), pages 683-690, July.
  • Handle: RePEc:bla:stratm:v:26:y:2005:i:7:p:683-690
    DOI: 10.1002/smj.463

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