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The Role of Venture Capital Syndication in Value Creation for Entrepreneurial Firms


Xuan Tian


Indiana University - Kelley School of Business - Department of Finance

May 19, 2010

Review of Finance, Forthcoming

Abstract:     
This paper provides evidence that venture capital (VC) syndication creates value for entrepreneurial firms in two dimensions. First, VC syndication creates product market value for their portfolio firms. Specifically, VC syndicates invest significant amounts in younger firms, in earlier financing rounds, and in early stage firms. Further, VC syndicates nurture innovation of their portfolio firms and help them achieve better post-IPO operating performance. Second, VC syndication creates financial market value for their portfolio firms. Specifically, VC syndicate-backed firms are more likely to have a successful exit, enjoy a lower initial public offering (IPO) underpricing, and receive a higher IPO market valuation. The findings are robust to a variety of alternative syndication measures, subsamples, econometric models, and controlling for endogeneity in VC syndication.

Number of Pages in PDF File: 46

Keywords: Venture Capital, Syndication, Value Creation, Firm Performance

JEL Classification: G24, G23, O31

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Date posted: March 26, 2008 ; Last revised: May 14, 2014

Suggested Citation

Tian, Xuan, The Role of Venture Capital Syndication in Value Creation for Entrepreneurial Firms (May 19, 2010). Review of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=954188

Contact Information

Xuan Tian (Contact Author)
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. Tenth Street
Bloomington, IN 47405
United States
812-8553420 (Phone)
824-8555875 (Fax)
HOME PAGE: http://kelley.iu.edu/tianx

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