The Post-IPO Performance of Venture Capital-backed Companies - Evidence from the European High-Tech Industry

Abstract: This thesis focusses on the question whether VC-backing is positively related to the long-term post-IPO performance of companies. It thereby aims to contribute to the clarification of the broader question whether VC funds create lasting value for European high-tech companies through their financing and continued provision of monitoring and advise services. To help answer this question, our empirical analysis compares the post-IPO operating and market performance of 102 Venture Capital-backed IPOs to a control group of 397 IPOs without a financial sponsor. We measure post-IPO operating performance as changes in operating return on assets and post-IPO market performance as buy-and-hold abnormal returns. We provide an up-to-date assessment by considering all European high-tech IPOs between 2001 and 2014. Our results indicate no significant positive relationship between Venture Capital sponsorship and the improvement in operating return on assets as well as abnormal market returns and are robust when accounting for differences in offering and firm characteristics. On the one hand, our findings are similar to previous papers examining the European Venture Capital market around the dot-com bubble without focusing on the high-tech industry. On the other hand, our findings differ to previous literature examining the US market which show a superior performance of Venture Capital-backed IPOs compared to non-Venture Capital-backed IPOs, also for high-tech companies in specific. Potential reasons include a lower quality of the services provided by VC funds to their European portfolio companies and a shortage of "superstars" among European high-tech start-ups.