Do venture capitalists improve the operating performance of IPOs?
This paper uses rigorous measures of operating performance and a sample extending into the post 2000 period to reexamine the performance of venture capital (VC) backed initial public offerings (IPOs). We find that the VC backed IPOs underperform non-VC backed IPOs, especially when firms have high ex...
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| Veröffentlicht in: | International review of economics & finance 2016-07, Vol.44, p.291-304 |
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| container_title | International review of economics & finance |
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| creator | Chen, Hung-Kun Liang, Woan-lih |
| description | This paper uses rigorous measures of operating performance and a sample extending into the post 2000 period to reexamine the performance of venture capital (VC) backed initial public offerings (IPOs). We find that the VC backed IPOs underperform non-VC backed IPOs, especially when firms have high excess cash, and propose that the higher excess cash retained in VC backed firms at IPO date may result in wasteful investment. Post-IPO real investment also confirms this notion. Further, our result holds whether or not VCs are on the board after the IPO date. Overall, our study supports the overinvestment hypothesis.
•Venture capital (VC) backed IPOs underperform non-VC backed IPOs, especially when firms have high excess cash.•Higher excess cash retained in VC backed firms at IPO date may motivate them to engage in wasteful investment.•Post-IPO real investment also supports the overinvestment hypothesis |
| doi_str_mv | 10.1016/j.iref.2015.12.009 |
| format | Article |
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•Venture capital (VC) backed IPOs underperform non-VC backed IPOs, especially when firms have high excess cash.•Higher excess cash retained in VC backed firms at IPO date may motivate them to engage in wasteful investment.•Post-IPO real investment also supports the overinvestment hypothesis</description><identifier>ISSN: 1059-0560</identifier><identifier>EISSN: 1873-8036</identifier><identifier>DOI: 10.1016/j.iref.2015.12.009</identifier><language>eng</language><publisher>Greenwich: Elsevier Inc</publisher><subject>Cash ; Initial public offering ; Initial public offerings ; Operating performance ; Studies ; Venture capital</subject><ispartof>International review of economics & finance, 2016-07, Vol.44, p.291-304</ispartof><rights>2016 Elsevier Inc.</rights><rights>Copyright Elsevier Science Ltd. Jul 2016</rights><lds50>peer_reviewed</lds50><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c394t-d3d75c4939127921009659ca78b7bf4a0af4cfbd45482c5636e0c7b4058818223</citedby><cites>FETCH-LOGICAL-c394t-d3d75c4939127921009659ca78b7bf4a0af4cfbd45482c5636e0c7b4058818223</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktohtml>$$Uhttps://www.sciencedirect.com/science/article/pii/S1059056016000241$$EHTML$$P50$$Gelsevier$$H</linktohtml><link.rule.ids>314,776,780,3537,27901,27902,65306</link.rule.ids></links><search><creatorcontrib>Chen, Hung-Kun</creatorcontrib><creatorcontrib>Liang, Woan-lih</creatorcontrib><title>Do venture capitalists improve the operating performance of IPOs?</title><title>International review of economics & finance</title><description>This paper uses rigorous measures of operating performance and a sample extending into the post 2000 period to reexamine the performance of venture capital (VC) backed initial public offerings (IPOs). We find that the VC backed IPOs underperform non-VC backed IPOs, especially when firms have high excess cash, and propose that the higher excess cash retained in VC backed firms at IPO date may result in wasteful investment. Post-IPO real investment also confirms this notion. Further, our result holds whether or not VCs are on the board after the IPO date. Overall, our study supports the overinvestment hypothesis.
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•Venture capital (VC) backed IPOs underperform non-VC backed IPOs, especially when firms have high excess cash.•Higher excess cash retained in VC backed firms at IPO date may motivate them to engage in wasteful investment.•Post-IPO real investment also supports the overinvestment hypothesis</abstract><cop>Greenwich</cop><pub>Elsevier Inc</pub><doi>10.1016/j.iref.2015.12.009</doi><tpages>14</tpages></addata></record> |
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| ispartof | International review of economics & finance, 2016-07, Vol.44, p.291-304 |
| issn | 1059-0560 1873-8036 |
| language | eng |
| recordid | cdi_proquest_journals_1793920795 |
| source | Elsevier ScienceDirect Journals |
| subjects | Cash Initial public offering Initial public offerings Operating performance Studies Venture capital |
| title | Do venture capitalists improve the operating performance of IPOs? |
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