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Can venture capital-backed IPOs compete with seasoned public companies?

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  • Susan Belden
  • Robert Keeley
  • Robert Knapp

Abstract

This paper investigates whether a small group of venture capital-backed initial public offerings (IPOs) were able to compete effectively with seasoned competitors. Previous studies have shown that IPOs have generally under performed seasoned companies. Using data from the Venture Capital Journal and Compustat , this paper tests for statistically significant differences in the long run market and operating performances of a carefully matched set of IPOs and seasoned companies. Using Wilcoxon paired sample tests as well as standard t-tests, it was found that over the nine years following the IPO, there were no statistically significant differences in market returns, except in the first year when the VCbacked IPOs under performed. On the operating side, it is found that there are no statistically significant differences, except that VC-backed firms have faster sales and asset growth. Our evidence suggests that this set of VC-funded IPOs was able to compete effectively with seasoned competitors. This is interesting and important because the previous research has found that newly public companies, on average, do not compete well against seasoned firms.

Suggested Citation

  • Susan Belden & Robert Keeley & Robert Knapp, 2001. "Can venture capital-backed IPOs compete with seasoned public companies?," Venture Capital, Taylor & Francis Journals, vol. 3(4), pages 327-336, October.
  • Handle: RePEc:taf:veecee:v:3:y:2001:i:4:p:327-336
    DOI: 10.1080/13691060110045995
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    Cited by:

    1. Yin He & Bin Li & Yunhua Tian & Lijun Wang, 2016. "Does Foreign Venture Capital Provide More Value-added Services to Initial Public Offering Companies in China?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(2), pages 90-106, March.
    2. Rosenbusch, Nina & Brinckmann, Jan & Müller, Verena, 2013. "Does acquiring venture capital pay off for the funded firms? A meta-analysis on the relationship between venture capital investment and funded firm financial performance," Journal of Business Venturing, Elsevier, vol. 28(3), pages 335-353.
    3. Michael Peneder, 2009. "The impact of venture capital on innovation behaviour and firm growth," Venture Capital, Taylor & Francis Journals, vol. 12(2), pages 83-107, November.
    4. Cécile Carpentier & Jean-Marc Suret, 2009. "The Survival and Success of Canadian Penny Stock IPOs," CIRANO Working Papers 2007s-28, CIRANO.
    5. Lohwasser, Todor S., 2020. "Meta-analyzing the relative performance of venture capital-backed firms," Discussion Papers of the Institute for Organisational Economics 4/2020, University of Münster, Institute for Organisational Economics.

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