Venture Capital Backing, Investor Attention, and Initial Public Offerings

63 Pages Posted: 14 Oct 2016 Last revised: 4 Aug 2018

See all articles by Thomas J. Chemmanur

Thomas J. Chemmanur

Boston College - Carroll School of Management

Karthik Krishnan

Northeastern University

Qianqian Yu

Lehigh University

Date Written: July 30, 2018

Abstract

We hypothesize that VC-backing garners greater “investor attention” (Merton (1987)) for IPOs, allowing IPO underwriters to perform two information-related roles more efficiently during the book-building and road-show process: information dissemination, where the lead underwriter disseminates noisy information about various aspects of the IPO firm to institutional investors; and information extraction, where the lead underwriter extracts information useful in pricing the IPO firm equity from institutional investors. Using pre-IPO media coverage as a proxy, we show empirically that VC-backed firm IPOs indeed obtain greater investor attention, causally yielding them more favorable IPO characteristics such as higher IPO and secondary market valuations.

Keywords: Initial Public Offerings, Investor Attention, Venture Capital

JEL Classification: G23, G24

Suggested Citation

Chemmanur, Thomas J. and Krishnan, Karthik and Yu, Qianqian, Venture Capital Backing, Investor Attention, and Initial Public Offerings (July 30, 2018). Available at SSRN: https://ssrn.com/abstract=2851196 or http://dx.doi.org/10.2139/ssrn.2851196

Thomas J. Chemmanur (Contact Author)

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Karthik Krishnan

Northeastern University ( email )

360 Huntington Avenue
414C Hayden Hall
Boston, MA 02115
United States
617-373-4707 (Phone)

HOME PAGE: http://www.northeastern.edu/kkrishnan

Qianqian Yu

Lehigh University ( email )

621 Taylor Street
Bethlehem, PA 18015
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
357
Abstract Views
2,237
Rank
153,517
PlumX Metrics