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

See all articles by Thomas J. Chemmanur

Thomas J. Chemmanur

Boston College - Carroll School of Management

Karen Simonyan

Suffolk University - Department of Finance

Hassan Tehranian

Boston College - Department of Finance

Date Written: September 2017

Abstract

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

Chemmanur, Thomas J. and Simonyan, Karen and Tehranian, Hassan, The Effect of Venture Capital Backing on the Top Management Quality of Entrepreneurial Firms and Implications for Initial Public Offerings (September 2017). Available at SSRN: https://ssrn.com/abstract=2021578 or http://dx.doi.org/10.2139/ssrn.2021578

Thomas J. Chemmanur

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Karen Simonyan (Contact Author)

Suffolk University - Department of Finance ( email )

8 Ashburton Place-Beacon Hill
Boston, MA 02108-2770
United States
(617) 973-5385 (Phone)

Hassan Tehranian

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-3944 (Phone)
617-552-0431 (Fax)

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