Debt Financing, Venture Capital, and Initial Public Offerings

68 Pages Posted: 13 Oct 2005 Last revised: 18 May 2022

See all articles by Christopher B. Barry

Christopher B. Barry

Texas Christian University - M.J. Neeley School of Business

Vassil T. Mihov

Texas Christian University - M.J. Neeley School of Business

Date Written: March 4, 2015

Abstract

We examine the roles of two financial intermediaries, lenders and venture capitalists, in a sample of more than 6,000 IPO firms during 1980-2012. Venture capitalists and lenders generally fund different types of firms and, on average, are substitutes; however, in some instances we observe interactions and complementary roles between the two funding sources. Firms with high debt have lower valuation uncertainty, and lower initial day returns than those backed by venture capital. However, firms with high debt levels underperform in the long-run, especially those without venture capital. We provide some evidence that firms backed by reputable venture capitalists perform better.

Keywords: Debt Financing, Venture Capital, and Initial Public Offerings

JEL Classification: G24, G32

Suggested Citation

Barry, Christopher B. and Mihov, Vassil T., Debt Financing, Venture Capital, and Initial Public Offerings (March 4, 2015). Journal of Banking and Finance, Vol. 58, 2015, Available at SSRN: https://ssrn.com/abstract=820248 or http://dx.doi.org/10.2139/ssrn.820248

Christopher B. Barry

Texas Christian University - M.J. Neeley School of Business ( email )

Box 298530
Fort Worth, TX 76129
United States

Vassil T. Mihov (Contact Author)

Texas Christian University - M.J. Neeley School of Business ( email )

817-257-7147 (Phone)
817-257-7227 (Fax)

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