Venture capitalist participation and the post issue operating performance of IPO firms

  • Jain B
  • Kini O
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Abstract

Previous studies have identified the value-added potential of venture capitalist monitoring in the initial public offering (IPO) market. We test this proposition by comparing the post-issue operating performance of venture capitalist-backed IPOs with a matched sample of non-venture capitalist-backed IPOs. We find that venture capitalist-backed IPO firms exhibit relatively superior post-issue operating performance compared to non-venture capital-backed IPO firms. Further, the market appears to recognize the value of monitoring by venture capitalists as refiected in the higher valuations at the time of the IPO. Finally, we find that proxies for the quality of venture capitalist monitoring are positively related to post-issue operating performance.

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Authors

  • Bharat a Jain

  • Omesh Kini

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