As firms approach their initial public offering (IPO), they evaluate the adequacy of the top management team (TMT) to successfully lead the firm through the IPO and manage a public firm. It is common to add managers to a TMT preceding an IPO, particularly since a high quality TMT signals legitimacy of the venture (Li, 2008; Zimmerman, 2008). While entrepreneurship literature has recently examined pre-IPO restructuring, the consequences of pre-IPO restructuring on post-IPO performance remains understudied.

New top managers revitalize an organization, bringing with them skills and resources needed to manage a firm as it evolves (Boeker & Wiltbank, 2005). However, transitions in management teams may be destabilizing: redefining managerial positions, disrupting work routines and interaction processes, and reducing the shared expectations and tacit knowledge within the team (Haveman & Khaire, 2004). Therefore, I hypothesize: the number of top managers added during the year pre-IPO increases the number of departures and additions within two years post-IPO. These disruptions also cause ineffectiveness in decision-making, resulting in decreased performance. Thus I hypothesize: original and ongoing TMT additions and departures will decrease post-IPO performance.