The Effect of Venture Capital Backing on the Top Management Quality of Entrepreneurial Firms and Implications for Initial Public Offerings
63 Pages Posted: 13 Mar 2012 Last revised: 4 Sep 2017
Date Written: September 2017
We make use of hand-collected data on a large sample of entrepreneurial firms to analyze the effect of venture capital (VC) backing on the management quality of firms going public and the effect of both VC-backing and management quality on IPO variables. We hypothesize that VC-backing will be associated with higher management quality. We further hypothesize that both higher management quality and VC-backing will reduce the extent of asymmetric information facing firms going public, allow firms to go public earlier, yield higher IPO and immediate after-market firm valuations, and improve post-IPO operating performance. Our empirical findings support the above hypotheses.
Keywords: Top Management Human Capital; Venture Capital Backing; Initial Public Offerings
JEL Classification: G24, G30, G39
Suggested Citation: Suggested Citation