One size does not fit all: the conditional role of CEO education on IPO performance

Exploiting a hand-collected dataset of US IPOs, we find that firms led by CEOs with a PhD or an MBA have three-year post-listing returns that are 12% and 11% higher, respectively, than the typical issuer. Yet these averages suppress an important dichotomy. A PhD is associated with higher IPO performance when innovation and specialized knowledge are prioritized, such as in small, young, or R&D-intensive firms. In contrast, an MBA adds value when adept management skills are required to cope with a larger firm size and organizational complexity. Additional evidence from the use of venture capital reinforces this dichotomy: CEOs with a PhD are more likely to align forces with VC firms which offer complementary management expertise. Our results caution that IPO investors remain indifferent to CEO education if this is unrelated to the issuer’s main organizational and environmental challenges, which explains the inconclusive evidence of prior research.