The evolution of ownership and board structure in newly public corporations

Using a sample of 249 firms that went public over 1975-1984, I provide evidence on how and why ownership and board structures evolve over the subsequent 16 years. I find that changes in ownership and board structures are related to lifecycle changes that alter the relative cost/benefit of different aspects of corporate governance. These results support the hypothesis that firms determine ownership and board characteristics in a manner consistent with value-maximization. Building on these results I examine whether lifecycle changes can account for the relationship between board size and Tobin's Q. I find that lifecycle changes cause board size to be substantially negatively correlated with Tobin's Q. However, I find that lifecycle changes do not explain the relationship between other board and ownership attributes and firm performance. These results caution against regulations that would constrain the ability of firms to jointly optimize ownership and board structures.