The Reality of IPO Performance: An Empirical Study of Venture-Backed Public Companies
AbstractThe incredible profits of Initial Public Offerings have often been emphasized in the media as a popular investment for the public. This paper takes a few steps towards refuting such an assertion by investigating the performance of 2,895 venture capital backed IPOs between 1968 and September 1998. The paper finds that it is incorrect to assume that investors demand very high annualized and cumulative rates of return to compensate for the risks they are taking by financing ventures in different sectors of the economy. The mean rates of return are found to be, in practice, very moderate, and often, negative.
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Bibliographic InfoPaper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 04-030.
Length: 24 pages
Date of creation: 01 Jul 2004
Date of revision:
Initial public offering; venture capita; annualized and cumulative rates of return; Information Technology; Medical; Health and Life Science; Non-High Technology; Biotechnology; Communications; Computer Industry; Semiconductor and Other Electronics Industries;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Financing, Investment, and Capacity
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G3 - Financial Economics - - Corporate Finance and Governance
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-02 (All new papers)
- NEP-CFN-2005-01-02 (Corporate Finance)
- NEP-INO-2005-01-02 (Innovation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Journal of Law and Economics,
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