Impact of Venture Capital Investment on Firm Performance: An Indian Evidence

Katti, Supriya; Raithatha, Mehul

doi:10.1177/0972150918779165

Cited by 9 publications

(7 citation statements)

References 32 publications

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“…The coefficients of other variables are insignificant. to increase economic efficiency are limited (Katti & Raithatha, 2018). Owners of a company can use concentrated ownership as a corporate governance mechanism to reduce agency costs.…”

Section: Endogenous Relationship Between Oc and Market Performance (T...mentioning

confidence: 99%

“…The interests of minority shareholders may not be represented by large shareholders and therefore, minority shareholders may be expropriated. In emerging markets like India, the laws for shareholders’ protections are weak and thus, the resources to increase economic efficiency are limited (Katti & Raithatha, 2018). Owners of a company can use concentrated ownership as a corporate governance mechanism to reduce agency costs.…”

Section: Managerial Implicationsmentioning

confidence: 99%

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Ownership Concentration and Firm Performance in India

Nashier

Gupta

2020

Global Business Review

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Ownership concentration (OC) is considered an important corporate governance mechanism because owners with concentrated shareholding influence the operations and management of a company. The ownership structure in developing countries is quite different from that in the developed markets; thus, we provide empirical evidence from an important emerging market like India. This study used panel data models and instrumental variables (IV) techniques using generalised method of moments (GMM) on a large sample of 11,136 firm-year observations to get efficient and reliable results. The endogeneity of OC has not been examined in India before. In this article, OC is measured by Herfindahl’s index as suggested by Demsetz and Lehn (1985) and Leech and Leahy (1991) . Other Indian studies in this area have used promoter shareholding as a proxy of OC. After controlling for endogeneity, we find that OC affects both market and accounting performance of a company, positively. The results suggest that concentrated ownership reduces agency costs as blockholders actively monitor the management of the company, thereby leading to better firm performance.

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Section: Endogenous Relationship Between Oc and Market Performance (T...mentioning

confidence: 99%

Section: Managerial Implicationsmentioning

confidence: 99%

Ownership Concentration and Firm Performance in India

Nashier

Gupta

2020

Global Business Review

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“…As Seet et al (2020) suggested, the internal value of entrepreneurial firms is positively related to entrepreneurial attitude. Indian evidence from Katti and Raithatha (2020) reveal a negative effect when opportunistic investors have a favorable exit option from their portfolios. Thus, possibly more optimistic entrepreneurs and VC investors are careless about firm performance in developing countries like China and India.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Does Venture Capital Reputation Contribute to Pre-IPO Performance of Entrepreneurial Firms in the Chinese Context?

et al. 2022

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This study investigates venture capital (VC) reputation impact on the pre-IPO performance of the entrepreneurial firms backed by three kinds of VCs. This study employs backward stepwise regression models following prior theoretical frameworks to examine the research question. Based on a database of the top 50 VC firms ranked during 2016 to 2020 and their portfolio firms. This study shows some contingent contribution to pre-IPO firm performance. Firstly, the reputation of the Chinese government-owned VCs is negatively associated with their portfolio firm performance. Still, there is a positive relationship between foreign and local private VCs. Secondly, entrepreneurial firm performance is significantly associated with industry policy and entrepreneur’s performance than VC reputation. This study has practical implications for entrepreneurs and limited partners regarding their corporation relationships with the Chinese VCs. JEL codes: G24, G34

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“…Raghupathy and Thillairajan (2015) compared the performances of VC-backed IPOs with that of non-VC backed IPOs, and concluded that VC-backed IPOs exhibited superior performance. Katti and Raithatha (2018) presented the evidences for value erosion when VCs exhibit the opportunistic behavior of exiting through the easy route of secondary market when the venture is expected to underperform. Their study focused on the returns generated at exit than on the exit routes adopted.…”

Section: Hypotheses Developmentmentioning

confidence: 99%

Untitled

2020

Asian Economic and Financial Review

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This study investigated the patterns adopted by VCs in their choice of exit routes The relationship between industry, transaction, and fund level variables with type of exit route chosen was also analyzed. Exit patterns were coded based on industry, type of exit and nature of fund. The relationship between industry, transaction, fund level variables and the type of exit route chosen was analyzed based on 221 transactions that occurred in India during the period from 2004 to 2017. High levels of similarity in the exit patterns of the service and manufacturing industries were observed. The myth that IPO from a service industry generates higher value does not seem to hold true. The choice of exit route depends on the type of exit viz. partial/complete exit. The probability of market exit increased by almost 2.8 times when the exit was partial. The fact that there is similarity in exit patterns of both foreign origin and Indian funds is beneficial for entrepreneurs paving way for strategy changes. Secondly the nondifferential impact of industry on exit route choice provides further options for both the entrepreneurs and investors. Contribution/ Originality: This study contributes to the existing scant literature on VC exits that specifically focuses on exits by early stage investors. This study provides the first evidence for the Indian VC market that the choice of exit route depends on the type of exit viz. partial/complete exit.

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Impact of Venture Capital Investment on Firm Performance: An Indian Evidence

Cited by 9 publications

References 32 publications

Ownership Concentration and Firm Performance in India

Ownership Concentration and Firm Performance in India

Does Venture Capital Reputation Contribute to Pre-IPO Performance of Entrepreneurial Firms in the Chinese Context?

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