The reputation effect of venture capital

The reputation effect of venture capital The main purpose of this paper to examine how the reputation effect of venture capital (VC) is associated with the initial return and ex-post performance of its invested IPO firms. In this paper, we use 267 Taiwanese IPO firms in 1994–2007 periods and find that VC-backed firms outperform non-VC-backed firms in terms of ex-post equity market-to-book ratio, ROA and R&D expenditure ratio. For those VC-backed IPOs, reputable VC-backed firms outperform mediocre VC-backed ones. Moreover, among the four proxies of VC reputation, the market share with respect to total IPO proceeds is most promising in explaining IPO firms’ ex-post performance. The overall result confirms the reputation effect associated with VC. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals
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Publisher
Springer US
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-010-0188-x
Publisher site
See Article on Publisher Site

Abstract

The main purpose of this paper to examine how the reputation effect of venture capital (VC) is associated with the initial return and ex-post performance of its invested IPO firms. In this paper, we use 267 Taiwanese IPO firms in 1994–2007 periods and find that VC-backed firms outperform non-VC-backed firms in terms of ex-post equity market-to-book ratio, ROA and R&D expenditure ratio. For those VC-backed IPOs, reputable VC-backed firms outperform mediocre VC-backed ones. Moreover, among the four proxies of VC reputation, the market share with respect to total IPO proceeds is most promising in explaining IPO firms’ ex-post performance. The overall result confirms the reputation effect associated with VC.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Jun 26, 2010

References

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