Are venture capital and buyout backed IPOs any different?

Axel Buchner, Abdulkadir Mohamed and Niklas Wagner

Journal of International Financial Markets, Institutions and Money, 2019, vol. 60, issue C, 39-49

Abstract: This paper addresses differences in the long and short run performance of Initial Public Offerings (IPOs) that are either backed by venture capital or by buyout sponsors. We investigate both the operating and the stock market performance of a sample of 851 U.S. IPOs during 2000 to 2014. Our results reveal significant short and long run performance differences. IPOs backed by venture capital sponsors are significantly more underpriced in the short run. We suggest that this is due to higher levels of information asymmetry. In the long run, return on assets as well as operating margins suggest that buyout backed IPOs outperform those backed by venture capital. However, we do not find significant differences in the risk-adjusted market performance using the Fama-French model. This suggests that buyout backed companies’ post listing operating performance improvements are well contained in the initial listing prices. Our results are not driven by selection effects, i.e. they are not due to the fact that buyout funds select different portfolio companies as compared to venture capital funds.

Keywords: Private equity; Buyout; Venture capital; Initial public offerings (search for similar items in EconPapers)
JEL-codes: G23 G24 G32 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:60:y:2019:i:c:p:39-49

DOI: 10.1016/j.intfin.2018.12.002

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