Do venture capitalists improve the operating performance of IPOs?

Chen, Hung Kun; Liang, Woan-lih

doi:10.1016/j.iref.2015.12.009

Cited by 11 publications

(4 citation statements)

References 64 publications

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“…First, VC and PE partners exploit market timing. Tykvova and Walz (2007) and Chen and Liang (2016) argue (Chahine and Filatotchev, 2008) combined with the fragmented European market for risk capital (Goergen et al, 2009, Groh et al, 2010 (Baker and Gompers, 2003). This can be ascribed to the relatively lower level and complexity of PE and VC performance, reputation, and consistency in Europe as argued by Tykvova and Walz (2007) Consistent with previous findings, and in accordance with the life cycle framework, the larger the firm size, the lower the probability of IPO withdrawal (Busaba et al, 2001, Boeh andSoutham, 2011), as information production costs are decreased (Chemmanur and Fulghieri, 1999).…”

Section: Insert Figures 4 and 5 About Heresupporting

confidence: 65%

The determinants of IPO withdrawal – Evidence from Europe

Helbing

Lucey

Vigne

2019

Journal of Corporate Finance

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Why do companies not follow through with an IPO after filing for one? This question is investigated by examining common stock IPOs for the largest countries in Europe. We cover 80% of the Western European IPO market over the 2001-2015 period. We establish that the IPO phenomenon of withdrawal is a common feature of equity markets and identify key characteristics that influence the probability of withdrawal. Findings indicate that venture capital or private equity involvement, the presence of negative news, CEO duality, or the intent to retire debt increase the probability of IPO withdrawal. On the other hand, higher levels of corporate governance or trading volume decrease the probability of IPO withdrawal. We argue that imminent agency conflicts and the lack of appropriate control mechanisms can force a company to withdraw from the IPO.

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Section: Insert Figures 4 and 5 About Heresupporting

confidence: 65%

The determinants of IPO withdrawal – Evidence from Europe

Helbing

Lucey

Vigne

2019

Journal of Corporate Finance

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“…We find that pre-IPO capital contribution of insiders on average has a significant (at 1% level) negative impact on post-IPO firm performance. This supports the entrenchment hypothesis where large shareholders expropriate at the expense of minority shareholders (Chen and Liang, 2016).…”

Section: Pre-ipo Capital Contribution and Post-ipo Firm Performancesupporting

confidence: 77%

“…Cash contribution by the promoters and promoters group indicates the quantum of family wealth invested in the firm. We also refer to the literature on venture capital (VC) funding, 1 where it is found that irrespective of the involvement of the VC in management, VC-backed IPOs have lower performance (Chen and Liang, 2016). Chen and Liang (2016) also find that VC-backed firms with higher excess cash retained have lower performance even if the VC's leave the firm's board post-IPO.…”

Section: Pre-ipo Contribution and Post-ipo Firm Performancementioning

confidence: 99%

Capital contribution, insider ownership and firm performance: evidence from Indian IPO firms

Jain

Gunasekar

Balasubramanian

2020

IJCG

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Several studies have explored the nonlinear relationship between insider ownership and post-IPO firm performance, whereas the inter-relationship among pre-IPO cash contribution, insider ownership and firm performance has not been investigated. Our study attempts to do so for an emerging economy, India using panel data of 199 IPO firms for the sample period of 2007 to 2018. Results indicate that there is a nonlinear relationship between insider ownership and post-IPO firm performance with lower ownership levels indicating positive impact and higher ownership levels indicating negative impact. Further, the study finds that pre-IPO cash contribution of owners has a long-term increasing negative impact, though these results significantly differ across varying levels of insider ownership. The study controls for endogeneity in the variables.

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“…Following Chen and Liang (2016), operating performance is measured as change in return on assets (ChgROA) from year t to year t+1. This study estimates the following model:…”

Section: Empirical Results Of Subsequent Stock Performancementioning

confidence: 99%

Do Firm Size Influence Financial Analyst Research Reports and Subsequent Stock Performance

2017

AFR

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This study investigates whether analysts issue more favorable research reports for small stocks than for large stocks. Small stocks tend not to attract investors due to their size, bad liquidity, easily manipulated price, insufficient information, and high-uncertainty risk. If analysts follow a small stock, it might be because the firm is thought to have good prospects. This study finds that analysts report more positively on small stocks, including in their stock recommendations and earnings growth forecasts. The empirical results show that small stocks perform better in the following year than do other stocks but that this is not the case for operating performance. This finding suggests that analysts are more likely to recommend under-valued stocks, but this may not imply that the operating performance of these stocks will improve the following year.

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Do venture capitalists improve the operating performance of IPOs?

Cited by 11 publications

References 64 publications

The determinants of IPO withdrawal – Evidence from Europe

The determinants of IPO withdrawal – Evidence from Europe

Capital contribution, insider ownership and firm performance: evidence from Indian IPO firms

Do Firm Size Influence Financial Analyst Research Reports and Subsequent Stock Performance

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