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IPO withdrawals: Are corporate governance and VC characteristics the guiding light in the rough sea of volatile markets?

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  • Reiff, Annika
  • Tykvová, Tereza

Abstract

More than 25% of all US firms that file for an IPO withdraw their offering from registration. Our study, which includes 3438 US domestic first-time IPO filings between 1997 and 2014, examines whether in times of high market volatility, high-quality corporate governance and VC backing may serve as a signal and thus reduce the withdrawal probability. Our results from an interaction term analysis support the view that corporate governance characteristics, but not the VC backing per se, tend to provide signals in highly volatile markets. In addition, our paper delves into the effect of VC characteristics. Local VCs tend to reduce the withdrawal probability. The same holds for VC syndication, particularly in highly volatile markets. Finally, our findings lend support to the conclusion that in highly volatile environments, reputable VCs tend to follow the dual-track strategy or postpone the IPO of their portfolio firms more often than in less volatile markets.

Suggested Citation

  • Reiff, Annika & Tykvová, Tereza, 2021. "IPO withdrawals: Are corporate governance and VC characteristics the guiding light in the rough sea of volatile markets?," Journal of Corporate Finance, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:corfin:v:67:y:2021:i:c:s0929119921000298
    DOI: 10.1016/j.jcorpfin.2021.101908
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    2. Boeh, Kevin K. & Dunbar, Craig G., 2021. "Raising capital after IPO withdrawal," Journal of Corporate Finance, Elsevier, vol. 69(C).
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    4. Wang, Shuangjin & Wang, Puxuan & Cebula, Richard J. & Foley, Maggie, 2023. "Board characteristics and IPO underpricing in China: The perspective of moderating effect of venture capitalists," Finance Research Letters, Elsevier, vol. 52(C).
    5. Humphrey, Jarrod, 2024. "Beyond the IPO horizon: Understanding the determinants and consequences of IPO withdrawal," Journal of Business Venturing Insights, Elsevier, vol. 21(C).

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    More about this item

    Keywords

    Initial public offering; Withdrawal; Volatile market; Corporate governance; Venture capital;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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