Do M&A exits have the same effect on venture capital reputation than IPO exits?

Salma Ben Amor and Maher Kooli

Journal of Banking & Finance, 2020, vol. 111, issue C

Abstract: This paper examines whether merger and acquisition (M&A) exits have the same effect on venture capital (VC) reputation than initial public offering (IPO) exits? Using a large sample of U.S. IPOs and M&As for the period 1996–2015, we find that M&A exit strategy has the same importance as IPO exit strategy in explaining the incentives of young venture capital firms to grandstand. There is, however, no evidence that young VC firms exit from their portfolio companies closer to the next follow-on fund than older VCs. In addition, our results show that to build their reputation, young VC firms are willing to accept a lower premium in the case of M&A exits and to bear the cost of higher underpricing in the case of IPO exits. We also find that the presence of reputed VC affects significantly the probability of an IPO exit over an acquisition exit.

Keywords: Initial public offerings; M&A; Venture capital; Grandstanding (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:111:y:2020:i:c:s037842661930278x

DOI: 10.1016/j.jbankfin.2019.105704

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