Faculty of Economics and Business Administration Publications Database

How Important Is Participation of Different Venture Capitalists in German IPOs?

Tykova, Tereza
Volume: 17
Number: 3
Pages: 350 - 378
Month: March
ISSN-Print: 1044-0283
Link External Source: Online Version
Year: 2007
Keywords: Venture Capital; Initial Public Offerings; Long-Run Performance; Underpricing; Heterogeneity
Abstract: This paper sets out to analyze the influence of different types of VCs on the performance of their portfolio firms around and after IPO in Germany. Our main finding is that market participants did not correctly assess the role played by the different types of VCs. Firms backed by independent, international and reputable VCs outperform other IPOs, and their share prices fluctuate less than those of their counterparts. Thus, independent, international and reputable VCs were able to add value by achieving a lower post-IPO idiosyncratic risk and a higher return. In contrast, firms backed by public VCs showed relative underperformance.