Pre-IPO growth, venture capital, and the long-run performance of IPOs

Jiangjing Que and Xueyong Zhang

Economic Modelling, 2019, vol. 81, issue C, 205-216

Abstract: This paper analyzes the relationship between pre-IPO growth and the post-IPO long-run performance for venture capital (VC)-backed firms. Our results show that the effect of pre-IPO growth on post-IPO long-run performance is positive, but is attenuated by venture capital in a matched sample. Focusing on VC-backed IPO firms, we find an inverted-U relationship between pre-IPO growth and post-IPO long-run performance. In addition, our baseline results continue to hold in a variety of settings, including post-IPO profitability performance and ownership divisions of venture capital. We explore one underlying interpretation through which post-IPO long-run performance exhibits a reversal when pre-IPO growth increases to a saturation point: VC-backed firms tend to engage in accounting fraud due to the incentives from some opportunistic VCs to take firms public earlier.

Keywords: Post-IPO long-run performance; Venture capital; Pre-IPO growth (search for similar items in EconPapers)
JEL-codes: G24 G32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:81:y:2019:i:c:p:205-216

DOI: 10.1016/j.econmod.2019.04.005

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