IPO's: The Impact of Venture Capital Links?
26 Pages Posted: 30 Aug 2010
Date Written: March 31, 2010
This paper examines the effects of venture capital (VC) backing on the performance of listed companies on the Australian securities market. We examine measures of the IPO pricing, operational performance after the IPO and market performance after the IPO for a matched sample of VC and non VC-backed IPOs between 1999 and 2005. We find evidence consistent with the certification/monitoring model that VC-backed companies are able to go public more quickly and at higher valuations than non VC-backed companies. The evidence on post IPO performance was mixed with some support for the certification/monitoring model and the adverse selection/grandstanding model. However, after partitioning the sample into old and young VC firms we find clearer evidence of the certification/monitoring role performed by older VC firms whereas younger VC firms show evidence of adverse selection/grandstanding effects.
Keywords: venture capital, private equity, IPO, Australia
JEL Classification: G12, G24
Suggested Citation: Suggested Citation