Venture Capitalist Certification in Initial Public Offerings

Posted: 12 Feb 2008

See all articles by Kathleen Weiss Hanley

Kathleen Weiss Hanley

Lehigh University - College of Business

William L. Megginson

University of Oklahoma

Multiple version iconThere are 2 versions of this paper

Abstract

This paper provides support for the certification role of venture capitalists in initial public offerings. Consistent with the certification hypothesis, a comparison of venture capital backed IPOs with a matched control sample of nonventure capital backed IPOs from 1983 through 1987 matched as closely as possible by industry and offering size indicates that venture capital backing results in significantly lower initial returns and gross spreads. In effect, the presence of venture capitalists in the issuing firms serves to lower the total costs of going public and to maximize the net proceeds to the offering firm. In addition, we document that venture capitalists retain a significant portion of their holdings in the firm after the IPO.

Suggested Citation

Hanley, Kathleen Weiss and Megginson, William L., Venture Capitalist Certification in Initial Public Offerings. Journal of Finance, Vol. 46, pp. 879-903, 1991. Available at SSRN: https://ssrn.com/abstract=1092177

Kathleen Weiss Hanley

Lehigh University - College of Business ( email )

Bethlehem, PA 18015
United States

William L. Megginson (Contact Author)

University of Oklahoma ( email )

307 W Brooks, 205A Adams Hall
Norman, OK 73019
United States
(405) 325-2058 (Phone)
(405) 325-1957 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/M/William.L.Megginson-

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,556
PlumX Metrics