When the going gets tough: board capital and survival of new economy IPO firms

Abstract

This study investigates the influence of corporate governance attributes on the likelihood of survival for 127 new economy IPO companies that listed on the ASX between 1994 to 2002. We use survival analysis techniques utilizing the Cox proportional hazards model with three main categories of corporate governance attributes; a) board size, b) board independence and c) ownership concentration We find that the survival time is negatively related to the percentage holdings of the top 20 shareholders. Our results also suggest that new economy IPO companies with low leverage and small company size are more likely to survive. However, the results indicate that board size and board independence do not explain the survival likelihood of new economy IPO firms. Our results suggest that corporate governance mechanisms that are designed specifically to protect minority shareholders and other providers of external capital are of little value during periods of extreme financial duress.