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The role of venture capitalist monitoring in mitigating cost stickiness: Evidence from Korea's IPO market

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  • Yang, Daecheon
  • Koo, Jeong-Ho
  • Kim, Jaemin

Abstract

This study investigates the monitoring role of venture capitalists in mitigating the degree of cost stickiness, which may stem from optimistic issuers intoxicated by the prosperous environment surrounding IPOs. In Korea's KOSDAQ market, we find that an issuing company managed by optimistic issuers is affected by cost stickiness after the offering. However, this cost stickiness decreases with the presence and the percentage ownership of long-term VCs. Our findings imply the role of VC monitoring in restraining issuers’ suboptimal decisions in an emerging IPO market.

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  • Yang, Daecheon & Koo, Jeong-Ho & Kim, Jaemin, 2023. "The role of venture capitalist monitoring in mitigating cost stickiness: Evidence from Korea's IPO market," Finance Research Letters, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:finlet:v:52:y:2023:i:c:s154461232200736x
    DOI: 10.1016/j.frl.2022.103560
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    More about this item

    Keywords

    Initial public offering; Venture capitalist; Cost stickiness; Managerial optimism; Empire-building preferences;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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