This study investigates the potential effects of investment-banking reputation and venture capital on the long-term performance of initial public offerings (IPOs) simultaneously. Our findings do not support the view that IPOs perform differently compared with other firms, with the only exception of venture-backed IPOs. We show that venture-backed IPOs are associated with long-term gains when we account for investment bankers' reputation, size and book-to-market effects. Zero investment portfolios, based on combinations of underwriter's reputation and venture capital involvement's in IPOs, provide additional evidence in support of the view that venture-backed IPOs, regardless of the reputation of underwriters, are associated with significant post-issue gains. Our results also indicate that the reputation of investment bankers matters only in the absence of venture capital. Copyright Banca Monte dei Paschi di Siena SpA, 2005
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Article provided by Banca Monte dei Paschi di Siena SpA in its journal Economic Notes.