This paper is the first study on the effects of pay-performance sensitivity (PPS) on the
performance of initial public offerings (IPOs) in the presence of social ties and family ties
of the top managers with board members. We find that both social ties and family ties
increase PPS. In turn, PPS improves IPO performance.
More importantly, greater PPS
increases the positive effect of social ties on IPO performance whereas it reduces the
negative effect of family ties.