Necessarily Optimistic? Upper Echelons’ Social Capital and IPO Valuation in the Hospitality Industry

Abstract

Despite the financial gains from initial public offerings (IPOs), they also bring costs and risks. Drawing on signaling theory and other supporting theories, this study focuses on how the social capital of top management teams (TMT) and a board of directors influence IPO valuation in the hospitality industry, particularly under the quality uncertainty of a firm’s IPO readiness. This study found that external social capital of a board positively impacts IPO performance while TMT’s external social capital has a negative effect. These significant relationships were positively moderated by a firm’s quality uncertainty. However, the internal social capital of both TMT and a board of directors shows no significant impact. These findings, which differ from general managerial settings, enrich the understanding of strategic leadership and corporate governance in IPO contexts within the hospitality sector. Also, the findings of this study offer practical insights for hospitality firms preparing for IPOs.