Management quality and operating performance: evidence for Canadian IPOs

This study investigates the impact of management quality on the operating performance of Canadian IPO's. Several dimensions of management quality are explored, including: the average tenure of management team members, the heterogeneity of tenures of team members, the size of the top management team, the number of outside directors, the educational and professional credentials of managers, the CEO dominance of the team, the past industry-specific experience of team members, and the presence of the founder in the management team. Operating performance is positively associated with the management team's tenure, size, and the team's inclusion of chartered accountants. Heterogeneous tenures of the top management team as well as dominant CEO's, and MBAs are negatively related to performance. Some evidence of earnings management by managers in the sample is also observed. Equity retention of directors and officers following the IPO has a nonlinear relationship with firm value.