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Does the Presence of Venture Capitalists Improve the Survival Profile of IPO Firms?

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  • Bharat A. Jain

    (Towson University, Maryland,)

  • Omesh Kini
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    Abstract

    The role of venture capital in the creation of the public corporation is now widely recognized. This study investigates whether venture capitalists add value to the going public process by improving the survival profile of IPO issuers. The survival of IPO issuers is not only likely to depend on managerial actions but also on the effectiveness of key market participants such as investment bankers and analysts. The form and function of the venture capital industry allows venture capitalists to influence the actions of managers, investment bankers, and analysts, and attract institutional interest. Conducting survival analyses using the Cox hazard methodology, we find that the involvement of venture capitalists improves the survival profile of IPO firms. Several other variables that are potentially influenced by VC involvement like R&D allocations, analyst following, investment banker prestige, and success on road shows are also positively related to the survival time of IPO issuers. Copyright Blackwell Publishers Ltd 2000.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Business Finance & Accounting.

    Volume (Year): 27 (2000-11)
    Issue (Month): 9&10 ()
    Pages: 1139-1183

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    Handle: RePEc:bla:jbfnac:v:27:y:2000-11:i:9&10:p:1139-1183

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X

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    Cited by:
    1. C├ęcile Carpentier & Jean-Marc Suret, 2009. "The Survival and Success of Canadian Penny Stock IPOs," CIRANO Working Papers 2007s-28, CIRANO.
    2. Gavin C. Reid & Julia A. Smith, 2005. "Venture Capital Investor Behaviour in the Backing of UK High Technology Firms: Financial Reporting and the Level of Investment," CRIEFF Discussion Papers 0510, Centre for Research into Industry, Enterprise, Finance and the Firm.
    3. Angenandt, P.P. & Goergen, M. & Renneboog, L.D.R., 2005. "Shareholder Lock-In Contracts: Share Price and Trading Volume Effects at the Lock-In Expiry," Discussion Paper 2005-115, Tilburg University, Center for Economic Research.
    4. Maunula, Mari, 2006. "The Perceived Value-added of Venture Capital Investors. Evidence from Finnish Biotechnology Industry," Discussion Papers 1030, The Research Institute of the Finnish Economy.
    5. Alan Hughes & Jaeho Lee, 2006. "What's in a name and when does it matter? The hot and cold market impacts on underpricing of certification, reputation and conflicts of interest in venture capital backed Korean IPOs," ESRC Centre for Business Research - Working Papers wp336, ESRC Centre for Business Research.
    6. Dafna Schwartz & Raphael Bar-El, 2006. "Venture Investments in Israel - A Regional Perspective Dafna Schwartz and Raphael Bar-El Ben-Gurion University, School of Management, Israel," ERSA conference papers ersa06p868, European Regional Science Association.

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