Corporate Venture Capital and Corporate Governance in Newly Public Firms: Evidence from Venture Backed IPOs

Abstract

We investigate the corporate governance of venture capital (VC) backed IPO firms that enter into strategic alliances. Startups often have alliances with outside strategic partners and with parents of corporate VCs (CVCs), who primarily invest in startups for strategic reasons. Both CVCs and outside strategic alliance partners can influence an IPO firm’s corporate governance. We find that firms with strategic alliances have greater independent director representation, more staggered boards and forced CEO turnovers and smaller percentage of new shares and secondary share sales. Comparing the governance of IPO firm with strategically oriented CVCs backing to IPO firms with outside strategic alliance partners, we find significantly stronger effects in firms backed by CVCs.

Keywords: Corporate governance, Corporate venture capital, strategic alliances, IPOs

JEL Classification: G30, G24