IDEAS home Printed from https://ideas.repec.org/a/spr/reaccs/v11y2006i1d10.1007_s11142-006-6398-8.html
   My bibliography  Save this article

Venture-backed Private Equity Valuation and Financial Statement Information

Author

Listed:
  • Chris Armstrong

    (Stanford University)

  • Antonio Davila

    (Stanford University
    IESE Business School)

  • George Foster

    (Stanford University)

Abstract

The relationship between (a) private and public equity market valuations and (b) financial statement information is examined for a sample of 502 venture capital backed companies from six different industries over the 1993–2003 period. Financial statement information explains a sizable component of the levels of and changes in valuation in both the Pre-IPO and Post-IPO periods. The findings support prior research for Post-IPO companies that revenues are value enhancing and costs are value diminishing. For the Pre-IPO period, we find that cost of sales; sales, marketing, general and administrative; and research and development are value enhancing—even when revenues are included in the analysis. This is consistent with costs incurred by early-stage, venture-backed companies having a strong “investment aspect” as the companies build a platform/infrastructure to grow revenue and validate their business model(s). We document the growth of early stage companies for revenues and costs in both calendar time (by round of private equity financing) and event time (relative to their eventual IPO).

Suggested Citation

  • Chris Armstrong & Antonio Davila & George Foster, 2006. "Venture-backed Private Equity Valuation and Financial Statement Information," Review of Accounting Studies, Springer, vol. 11(1), pages 119-154, March.
    • Handle: RePEc:spr:reaccs:v:11:y:2006:i:1:d:10.1007_s11142-006-6398-8
    DOI: 10.1007/s11142-006-6398-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11142-006-6398-8
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11142-006-6398-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:reaccs:v:11:y:2006:i:1:d:10.1007_s11142-006-6398-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.