Can VCs Time the Market? An Analysis of Exit Choice for Venture-Backed Firms
44 Pages Posted: 8 Feb 2009 Last revised: 12 Apr 2011
Date Written: April 4, 2011
We use a sample of 8163 venture-backed companies over three decades to test the competing hypotheses that levels and relative shares of IPO and M&A exits are affected by market timing, versus pseudo market timing that reflects market conditions. We find evidence of pseudo market timing. VC-backed issuers react to market or sector run-ups but do not predict downturns. We find no evidence that firm-specific market timing contributes to IPO or M&A waves. We also find that acquirers turn to acquisition when other opportunities are unattractive, and that the market may be slow to recognize that such opportunities are declining.
Keywords: IPO, acquisition, market timing, pseudo market timing, venture capital
JEL Classification: G14, G24, G32, G34
Suggested Citation: Suggested Citation