Do Venture Capital Firms Promote "Good" Governance At IPO Companies? An Examination Of The Decision To Adopt A Classified Board

This paper examines the effect of venture capital backing on the likelihood an IPO company elects to adopt a classified board of directors, a governance arrangement that has an antitakeover effect and is typically considered an indicator of poor corporate governance. In a sample of 795 companies that raised over $50 million in their IPO between 1996 and 2006, 69% of companies adopt a classified board at the time of IPO. The effect of venture capital backing on the likelihood the company adopts a classified board is positive and large.