The Special Case of Venture Boards – Commentary by IEMS’ Sam Garg for the SCMP Education Post

Published on: 2016-02-03

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The SCMP Education Post published a research summary by IEMS’ Sam Garg on his research on the special features of venture boards and their likely impact on firm performance. He defines ventures as privately-owned, professionally-funded firms, which have become important for economic growth and innovation.

As quoted in the article:

Boards of directors play an important governance role in companies by monitoring executives and firm performance. But not all boards are alike. The boards of public firms are accountable to shareholders and offer a perspective removed from daily operations. Venture boards, on the other hand, are far more hands-on and have a different focus because their firms are not traded on the open market. Yet until now, all the received wisdom about boards has focused on public firms.

Professor Sam Garg has stepped in to fill that breach by teasing out the special features of venture boards and their likely impact on firm performance. He defines ventures as privately-owned, professionally-funded firms (also known as entrepreneurial firms), which have become important for economic growth and innovation.

“Boards of directors are a primary governance mechanism of ventures and they are likely to have a distinctive monitoring function relative to public firms. For example, the separation between ownership and control is less relevant in ventures because their CEOs typically have greater alignment of their financial interests with owners than public firm CEOs.

“Ventures are also often at earlier stages of development, have fewer slack resources, operate in highly uncertain and changing environments, and are typically focused on innovation.

Read the full article here: SCMP Education Post

[Bio] Sam Garg

[IEMS Working Papers] What Makes the Bonding Stick? A Natural Experiment Involving the U.S. Supreme Court and Cross-Listed Firms

[IEMS Working Papers] Board Reforms and Firm Value: Worldwide Evidence

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