RT Journal Article
SR Electronic
T1 Venture Capitalist Involvement and the Long-Run Performance of IPOs
JF The Journal of Private Equity
FD Institutional Investor Journals
SP 7
OP 17
DO 10.3905/jpe.2006.667555
VO 10
IS 1
A1 Terry L. Campbell II
A1 Melissa B. Frye
YR 2006
UL https://pm-research.com/content/10/1/7.abstract
AB The long-run underperformance of initial public offerings (IPOs) is a well documented anomaly. Recent research has shown that venture-backed IPOs marginally outperform non venture-backed IPOs and posits that venture capitalists (VCs) may add value through a variety of methods. We investigate the relation between the degree of involvement by VCs and the long-run performance of IPOs. We find a positive relationship between the proportion of monitoring directors (VC and independent directors) and long-run performance, evidence consistent with VCs shaping the board to increase monitoring. Further, it appears that VC-backed firms are able to reduce asymmetric information through attracting analysts and large shareholders thus improving long-run performance. Our results suggest that the underperformance of IPOs may be driven in part by those firms with none or low degrees of VC involvement.TOPICS: Private equity, portfolio construction, in portfolio management, performance measurement