Internationalization and the IPO performance of new ventures

LiPuma, Joseph A.

doi:10.1016/j.jbusres.2011.05.007

Cited by 32 publications

(19 citation statements)

References 71 publications

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“…However, the international evidence on the impact of VC investors on their portfolio firms after listing is mixed (Jain, ; Brau et al ., ; LiPuma, ; Minardi et al ., ; Rosenbusch et al ., ). Existing studies focus on the stock market and/or operating performance of the newly listed firm for a set period after listing.…”

Section: Introductionmentioning

confidence: 99%

The value of ongoing venture capital investment to newly listed firms

Hsu

Owen

Suchard

2019

Accounting & Finance

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We examine whether the market values continuing venture capital (VC) investor involvement in firms post-IPO. Compared to the US, Australian VC investors exit their investments post-IPO by on-market sales rather than distribution of holdings to their investors. Lockup periods tend to be longer and ownership thresholds for reporting trades lower. We find that the market responds positively to buy transactions, negatively to sell transactions of VC investors and negatively to the resignation of VC directors. These results are consistent with VC investors in the firm having a positive influence and creating value from which the VCs and other shareholders benefit.

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Section: Introductionmentioning

confidence: 99%

The value of ongoing venture capital investment to newly listed firms

Hsu

Owen

Suchard

2019

Accounting & Finance

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“…Further, as the characteristics of the industry environment profoundly affect effective decision-making dynamics (Atinc & Ocal, 2014;Baum & Wally, 2003), the signaling effect of the existence of PSE between the CEO and the board may differ depending on industry characteristics at the IPO. Because the prospects for venture growth following the IPO depend to a great extent on the venture's ability to exploit new opportunities (Cao, Ding, & Zhang, 2016;LiPuma, 2012), our focus is on industry ambiguity as it captures the lack of clarity in interpreting or distinguishing industry opportunities (March, Olsen, & Christensen, 1978;Santos & Eisenhardt, 2009). 3 | HYPOTHESES…”

Section: Introductionmentioning

confidence: 99%

Initial public offering valuation and prior shared experience in the boardroom of threshold ventures: A study of industry effects

Pérez‐Calero

Larrañeta

Wright

2019

Corporate Governance

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Research question/issue We explore the following question: How do initial public offering (IPO) investors value the existence of prior shared experience (PSE) between the CEO and the board of threshold ventures? Research findings/insights Building on the resource provision role of the board, signaling, and the dynamics of decision making within teams literatures, our results show that extensive PSE between the CEO and the board is detrimental to IPO valuation because it augments the perceived risk of overconfidence and myopic decisions sending negative signals to investors. Yet, the industry diversity of that PSE and the level of industry ambiguity mitigate such negative signaling effects. Theoretical/academic implications We make three main contributions to the literature. First, we make a specific contribution by advancing that extensive PSE between the CEO and the board is detrimental for IPO value, unless it is mitigated by the diversity of such PSEs across different industries. Our results therefore highlight boundaries within which previously accepted findings about the positive relationship between PSE and new venture performance do not hold. Second, we enrich our understanding of the relationship between board design and industry conditions by showing that investors perceive differently the extensiveness of PSE between the CEO and the board depending on the degree of industry ambiguity. Overall, we move beyond prior research on signaling, which has tended to focus on primary intended and costly signals, exploring signals with potential negative effects at IPO. Practitioner/Policy Implications Our research has practical implications for ambitious entrepreneurial ventures trying to achieve high growth by going public in their early stages of development. Board compositions may commonly be transformed ahead of IPOs to send a signal to the potential investors about their effectiveness in meeting the strategic challenges of being in the public arena. Our findings suggest that entrepreneurs, pre‐IPO investors, and their advisors may need to adopt a fine‐grained approach to constructing effective boards at an early stage.

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“…They posit that their results are due to the potential “upsides” of international markets. In contrast, however, LiPuma () suggests that internationalized U.S. technology‐based firms have lower IPO valuations because of the increased monitoring costs associated with international operations. We build on this literature by providing additional evidence on the post‐IPO risk‐adjusted abnormal stock returns of U.S. firms that go global and those that stay local.…”

Section: Introductionmentioning

confidence: 99%

“…To examine the post-IPO risk-adjusted abnormal stock performance of internationalized and domestic-only firms, we follow a portfolio framework utilized in prior IPO studies (e.g., Carter et al, 2011). 2 This medium-and long-term abnormal return analysis differs from prior studies that primarily examine the impact of multinationality on the IPO date (Al-Shammari et al, 2013;LiPuma, 2012). In addition, we perform analyses to explore whether the relative strength/weakness of the U.S. dollar (compared to other currencies) and the relative performance of the U.S. stock market (compared to foreign stock markets) explains our abnormal stock return findings since the value of foreign operations may increase with a weak U.S. dollar and strong foreign stock market returns.…”

Section: Introductionmentioning

confidence: 99%

Does going global or staying local improve the long‐term survival and performance of IPOs?

Christophe

Lee

2018

Global Strategy Journal

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Research Summary: This empirical study investigates the impact of internationalization on the long‐term performance of U.S. IPOs (initial public offerings). We find that internationalized IPOs exhibit higher survival rates, and if an internationalized IPO is subsequently delisted, that delisting is significantly more likely to result in a positive outcome when compared to the delisting outcomes for domestic‐only IPOs. In addition, over 5‐ and 10‐year holding periods following the IPO, a portfolio of the internationalized firms exhibits significantly positive risk‐adjusted abnormal stock returns, whereas the return for a portfolio of the domestic‐only firms was lower and generally not significantly different than zero. In short, we add to the existing literature on factors that influence IPO survival and performance and show that internationalization also is an important firm characteristic. Managerial Summary: We examine the impact of internationalization on the survival and stock return performance of IPO firms. More specifically, we investigate the performance of two categories of U.S. IPOs: companies that go public and have international operations and companies that are purely domestic firms. Our results suggest that IPO firms that are internationalized have higher survival rates than domestic‐only firms and also enjoy superior subsequent stock performance. This study provides novel insights and additional descriptive evidence that going global is better for the survival and performance of IPOs.

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Internationalization and the IPO performance of new ventures

Cited by 32 publications

References 71 publications

The value of ongoing venture capital investment to newly listed firms

The value of ongoing venture capital investment to newly listed firms

Initial public offering valuation and prior shared experience in the boardroom of threshold ventures: A study of industry effects

Does going global or staying local improve the long‐term survival and performance of IPOs?

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