The role of venture capitalist monitoring in mitigating cost stickiness: Evidence from Korea's IPO market

Daecheon Yang, Jeong-Ho Koo and Jaemin Kim

Finance Research Letters, 2023, vol. 52, issue C

Abstract: This study investigates the monitoring role of venture capitalists in mitigating the degree of cost stickiness, which may stem from optimistic issuers intoxicated by the prosperous environment surrounding IPOs. In Korea's KOSDAQ market, we find that an issuing company managed by optimistic issuers is affected by cost stickiness after the offering. However, this cost stickiness decreases with the presence and the percentage ownership of long-term VCs. Our findings imply the role of VC monitoring in restraining issuers’ suboptimal decisions in an emerging IPO market.

Keywords: Initial public offering; Venture capitalist; Cost stickiness; Managerial optimism; Empire-building preferences (search for similar items in EconPapers)
JEL-codes: G02 G24 G31 M41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:52:y:2023:i:c:s154461232200736x

DOI: 10.1016/j.frl.2022.103560

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