Venture Capital-backing pre-IPO and Long-run Stock Performance
Abstract: This study aims to examine the effects that venture capital-backing has on companies that recently went public. The study examines three specific parts; a general stock return increasing signal of venture capital-backing, whether company characteristics affect the relationship between venture capital-backing and stock returns, and venture capital-backing in two specific industries. Multiple linear regression models are constructed with accounting data from the year of the initial public offering and venture capital-backing as explanatory factors, and market-adjusted stock returns as the performance measure. A general signaling effect of venture capital-backing is not found, however, undervaluation and overvaluation of company-level characteristics affected by venture capital-backing are found in the two industries. Furthermore, company-level characteristics are found to have effects on the relationship between venture capital-backing and stock return. The effect of venture capital-backing is larger when proxies for information asymmetry are larger, indicating that signaling theory fits well to explain the findings.
AT THIS PAGE YOU CAN DOWNLOAD THE WHOLE ESSAY. (follow the link to the next page)