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Human Capital, Management Quality, and the Exit Decisions of Entrepreneurial Firms

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  • He, Shan
  • Li, C. Wei

Abstract

We model the employee incentive problem jointly with a firm’s exit decision. Our model predicts that firms in industries where human capital is important are more likely to go public and use high-powered, stock-based compensation. We also show that the higher the management quality, the more likely a firm is to go public than to be acquired. Regarding life cycle, a firm with high capital intensity and/or high management quality will choose to go public at a younger age.

Suggested Citation

  • He, Shan & Li, C. Wei, 2016. "Human Capital, Management Quality, and the Exit Decisions of Entrepreneurial Firms," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 51(4), pages 1269-1295, August.
    • Handle: RePEc:cup:jfinqa:v:51:y:2016:i:04:p:1269-1295_00
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    Cited by:

    1. Zuluaga Arango, Paula & Rincón, Diego Useche & RojasBerrio, Sandra Patricia, 2023. "Relevancia, evolución y tendencias de la supervivencia empresarial. Una revisión de literatura en finanzas," Revista Tendencias, Universidad de Narino, vol. 24(1), pages 252-278, January.
    2. Huang, Pinghsun & Huang, Hsin-Yi & Zhang, Yan, 2019. "Do firms hedge with foreign currency derivatives for employees?," Journal of Financial Economics, Elsevier, vol. 133(2), pages 418-440.
    3. Dahai Li & Huan Wang & Yang Li, 2023. "Incentive Mechanisms for Thermal Power Generation Enterprises with Conflicting Tasks: Electricity Production versus Carbon Emission Reduction," Sustainability, MDPI, vol. 15(13), pages 1-22, July.
    4. Chemmanur, Thomas J. & Gupta, Manish & Simonyan, Karen & Tehranian, Hassan, 2021. "The relationship between venture capital backing and the top management team quality of firms going public and implications for initial public offerings," Journal of Business Venturing, Elsevier, vol. 36(6).

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