The Dark Side of Independent Venture Capitalists: Evidence from Japan

Posted: 30 Sep 2011 Last revised: 21 Feb 2013

See all articles by Yue Sun

Yue Sun

Beijing University of Chemical Technology - School of Economics & Management

Konari Uchida

Kyushu University

Mamoru Matsumoto

The University of Kitakyusyu

Date Written: February 1, 2013

Abstract

Using Japanese firms that went public during the period 1998-2006, we find that independent venture capitalist-backed IPO firms are significantly younger and smaller than IPO companies backed by venture capital firms that are subsidiaries of financial institutions. IPOs backed by independent venture capitalists also tend to use less reputable underwriters and go public on stock exchanges with less strict listing requirements due to their immaturity. Young and small IPO companies experience significantly greater underpricing and poorer long-term operating performance. Taken all together, independent venture capitalists make lower quality companies go public than finance-affiliated venture capitalists.

Keywords: Independent venture capitalist, Finance-affiliated venture capitalist, IPO, Underpricing, Long-term performance

JEL Classification: G24, G32

Suggested Citation

Sun, Yue and Uchida, Konari and Matsumoto, Mamoru, The Dark Side of Independent Venture Capitalists: Evidence from Japan (February 1, 2013). Pacific-Basin Finance Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1928586 or http://dx.doi.org/10.2139/ssrn.1928586

Yue Sun

Beijing University of Chemical Technology - School of Economics & Management ( email )

Beijing
China
861064434892 (Phone)

Konari Uchida (Contact Author)

Kyushu University ( email )

6-19-1, Hakozaki, Higashiku
Fukuoka, 812-8581
Japan
+81-92-642-2463 (Phone)

Mamoru Matsumoto

The University of Kitakyusyu ( email )

Kitakyusyu
Japan

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