The Performance of Venture-Backed IPOs in Germany: Exit Strategies, Lock-up Periods, and Bank Ownership
University of Giessen - Center for Finance and Banking
EFMA 2004 Basel Meetings Paper
The agency problems for initial public offerings are well documented in the literature. The objective of this research is to investigate the potential conflicts of interest for the Neuer Markt in Germany. Of special interest are venture-backed IPOs and those in which banks acted as venture capitalist, underwriter, and provided analyst recommendations. We observe high initial returns and out-performance over the first 6 months of trading which decreases significantly over the subsequent 18 months. The individual performance depends on the VC's underwriter and bank affiliation, exit behavior, and lock-up commitment. Venture capitalists and especially banks timed their exit well. This indicates some serious agency problems in the German IPO market.
Number of Pages in PDF File: 44
JEL Classification: G14, G15, G24, G32
Date posted: June 12, 2004