Founder Chief Executive Officer, and corporate decisions: Evidence from Australia

Md. Rayhan Islam

This thesis investigates the role of Founder Chief Executive Officers (Founder CEOs) in shaping corporate financial decisions among Australian publicly listed firms. While CEO characteristics have been widely studied, limited attention has been given to founder identity, particularly within Australia’s unique institutional and governance context. Addressing this research gap, using a panel dataset of ASX-listed firms from 2012 to 2021, the thesis explores three interrelated aspects of founder leadership: (1) firm leverage and governance monitoring, (2) executive opportunism, and (3) earnings stability. First study examines how founder CEOs influence decisions regarding leverage. Agency theory presents competing views: the alignment perspective advocates for financial conservatism, while the entrenchment view predicts the opportunistic use of debt. Findings show that founder CEOs are associated with lower leverage, and this relationship strengthens under institutional ownership, suggesting that external monitoring enhances the financial discipline of founder-led organisations. Next, research investigates executive opportunism, measured through abnormal executive expenses and discretionary accruals. Results reveal that founder CEOs are less likely to engage in opportunistic practices, particularly when they hold significant ownership and longer tenure. This supports the view that founder identity and equity alignment constrain self-serving behaviour, reinforcing stewardship over value extraction. Finally, the study analyses the effect of founder leadership on earnings stability. While founders are often associated with innovation and risk-taking, evidence suggests that founder CEOs tend to deliver more stable earnings streams, particularly in firms with longer-serving founders and concentrated ownership. This suggests founder leadership fosters financial discipline and sustainable performance. Overall, this thesis contributes to corporate governance literature by showing that founder CEOs promote conservative leverage, reduce opportunism, and enhance earnings stability, particularly when supported by institutional monitoring. The findings have practical implications for boards, investors, and policymakers, highlighting that founder-led firms, when governed effectively, can signal reduced risk and long-term value creation.

Founder Chief Executive Officer, and corporate decisions: Evidence from Australia

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