A recent study by three professors at Purdue’s Krannert School of Management has shown how founder-led companies can outperform the broader market index.
A founder-led company, defined as companies where the founder still plays a significant role as CEO, chairman, board member, or owner or adviser provides an interesting perspective on growth companies
On the surface this makes sense as when companies grow bigger, their overall growth (or returns) should theoretically slow for a number of obvious reasons, including that of simple scalability.
However it’s been suggested that as a company grows, they often lose their purpose. Or more specifically they lose the purpose that was set in place by the founder. As the goals diverge, then often times companies lose momentum and as a result we see that reflected in their share price.
If a founder stays involved in a company, then they are able to maintain that purpose or direction and that can lead to the level of outperformance that we see in the study.
Certainly something to consider for discretionary investors when assessing companies at face value.
