The influence of interlocking directorates on the outcomes of initial public offerings and post IPO long-term performance

This study investigates the influence of a firm.s interlocked directorate network on the outcomes of initial public offerings (IPO) and post IPO long-term performance. We find that IPO firms having greater number of interlocking directorate ties, or occupying a more central position in the directorate network allow them to: (i) attract more prestigious underwriters and greater institutional interest; (ii) experience lower levels of underpricing, lower underwriting expenses and larger IPO offer sizes when undertaking IPOs, and (iii) achieve superior long- term performance post IPO. Moreover, the favorable impacts of the network of interlocking directorates on the performance of IPOs are magnified when firms operate in high-tech environments or have smaller firm size. The results of this study help to learn if the directorate network resource may mitigate the liability of newness of IPO firms as well as certify its value, thereby providing valid support to the resource dependence theory.