Venture Capital Reputation and Investment Performance

64 Pages Posted: 4 Jun 2008 Last revised: 15 Jan 2013

See all articles by Rajarishi Nahata

Rajarishi Nahata

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Date Written: 2008

Abstract

I propose a new measure of venture capital (VC) firm reputation and analyze its performance implications on private companies. Controlling for portfolio company quality and other VC-specific factors including experience, connectedness, syndication, industry competition, exit conditions, and investment environment, I find companies backed by more reputable VCs by initial public offering (IPO) capitalization share (based on cumulative market capitalization of IPOs backed by the VC), are more likely to exit successfully, access public markets faster, and have higher asset productivity at IPOs. Further tests suggest VCs' IPO capitalization share effectively captures both VC screening and monitoring expertise. My findings have financial implications for limited partners and entrepreneurs regarding their VC-sorting activities.

Keywords: Venture Capital, Reputation, Certification, Initial Public Offerings, M&A

JEL Classification: G24

Suggested Citation

Nahata, Rajarishi, Venture Capital Reputation and Investment Performance (2008). Journal of Financial Economics (JFE), 2008 (90), 127-151. Available at SSRN: https://ssrn.com/abstract=1139834

Rajarishi Nahata (Contact Author)

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

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