How Does Venture Capital Experience Affect Portfolio Firm's Long-Run Performance?

39 Pages Posted: 26 Jul 2018

See all articles by Qiong Ji

Qiong Ji

Xi'an Jiaotong-Liverpool University

Xiaoming Ding

Xi'an Jiaotong-Liverpool University - Business School

Abhinav Goyal

University College Cork

Date Written: June 7, 2017

Abstract

This study examines if and how does venture capital’s experience, as measured by venture capital age, specialization and historical investment influence post-IPO performance and growth of firms. We find that venture capital experience has significant positive effects on long-run performance measures, even after controlling for venture capital selectivity. In addition, we find that VC-backed firms exhibit better corporate governance mechanisms. Those firms have significantly higher probability of allocating ownership to senior executives than non-venture backed firms and are able to better align the interests of the executives and the shareholders. In addition, venture backed firms are associated with more independent directors, and have less duality and ownership concentration problems. Identification concerns are addressed by using instrumental variables. Our work supports the bulk of value that VC adds is the result of VC monitoring and involvement in corporate governance. Hence, we contribute to the literature on corporate finance and corporate governance in emerging markets by examining the impact of institutions.

Keywords: Venture Capital, Post-IPO performance, Experience, Corporate Governance

JEL Classification: G32, G34

Suggested Citation

Ji, Qiong and Ding, Xiaoming and Goyal, Abhinav, How Does Venture Capital Experience Affect Portfolio Firm's Long-Run Performance? (June 7, 2017). 31st Australasian Finance and Banking Conference 2018, Available at SSRN: https://ssrn.com/abstract=3220281 or http://dx.doi.org/10.2139/ssrn.3220281

Qiong Ji (Contact Author)

Xi'an Jiaotong-Liverpool University ( email )

111 Ren'ai Road
Suzhou Industrial Park
Suzhou, Jiangsu 215123
China

Xiaoming Ding

Xi'an Jiaotong-Liverpool University - Business School ( email )

26 Xianning W Rd.
Dushu Lake Higher Education Town
Suzhou, Jiangsu Province 215123
China

Abhinav Goyal

University College Cork ( email )

O'Rahilly Building
College Road
Cork
Ireland
+353 (0)21 490 2839 (Phone)

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