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Venture Capital and Corporate Governance in the Newly Public Firm

Review of Finance, Forthcoming

51 Pages Posted: 11 Dec 2003 Last revised: 6 Feb 2016

Yael V. Hochberg

National Bureau of Economic Research (NBER); Rice University - Jesse H. Jones Graduate School of Business

Date Written: September 6, 2011

Abstract

I examine the effects of venture capital backing on the corporate governance of the entrepreneurial firm at the time of transition from private to public ownership. Using a selection model framework that instruments for venture backing with variations in the supply of venture capital, I conduct three sets of tests comparing corporate governance in venture- and non-venture-backed IPO firms. Venture-backed firms have lower levels of earnings management, more positive reactions to the adoption of shareholder rights agreements, and more independent board structures than similar non-venture-backed firms, consistent with better governance. These effects are not common to all pre-IPO large shareholders.

Keywords: Venture capital, corporate governance, initial public offering, earnings management, boards of directors

JEL Classification: G24, G34

Suggested Citation

Hochberg, Yael V., Venture Capital and Corporate Governance in the Newly Public Firm (September 6, 2011). Review of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=474542 or http://dx.doi.org/10.2139/ssrn.474542

Yael V. Hochberg (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

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