Financial wealth, socioemotional wealth, and founder exits: an empirical examination of Chinese IPOs

Hao Jiao, Tang Wang, Ilan Alon

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


Initial public offerings (IPOs) are typically viewed as the peak of entrepreneurial success, providing founder-CEOs a chance to profitably exit. Founder-CEOs, however, are often motivated by non-financial considerations in addition to the desire to amass wealth. According to the behavioral agency model, the founder-CEOs’ framing of gains vs. losses of their wealth creation at IPO determines their risk aversion vs. risk taking behaviors. In addition, the behavioral agency model argues that founder-CEOs with a great deal of socioemotional wealth fear losing that wealth. This fear will attenuate their aversion to losing financial wealth. To test our model, we collected a sample of 130 entrepreneurial IPOs from 2004 to 2009 in China whose founder-CEOs left the firm after it went public. The results confirm a U-shaped relationship between the founder-CEOs’ financial wealth and their exit speed after the IPO. A high level of socioemotional wealth, exemplified by the CEOs’ tenure, a higher ratio of insiders on the board, and the age of the stock market, negatively moderates the effect of financial wealth. We contribute to the literature by providing empirical support for the behavioral agency model and founder-CEO exits in China by examining both financial and socioemotional wealth.

Original languageEnglish
Pages (from-to)208-226
Number of pages19
JournalEntrepreneurship and Regional Development
Issue number3-4
StatePublished - 2021
Externally publishedYes


  • Behavioural agency model
  • China
  • IPO
  • founder exit
  • socioemotional wealth


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