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Signaling in science-based IPOs: The combined effect of affiliation with prestigious universities, underwriters, and venture capitalists

Massimo G. Colombo, Michele Meoli and Silvio Vismara

Journal of Business Venturing, 2019, vol. 34, issue 1, 141-177

Abstract: This paper studies the combined effect of affiliation with prestigious universities, underwriters, and venture capitalists on the valuation of biotech ventures at IPO and their post-IPO performance. We argue that affiliation to a prestigious university provides the affiliated firm with a quality signal in the scientific domain. The pure quality signaling effect of the affiliation is isolated from the substantive benefits it provides by performing a difference-in-difference approach based on the scientific reputation of scientists in firms' upper echelons. The signal is stronger the weaker is the scientific reputation of scientists of the focal IPO-firm and is additive to those provided by prestigious venture capitalists and underwriters. Results for a sample of 254 European biotech ventures that went through an IPO between 1990 and 2009 confirm our predictions.

Keywords: IPO; Signaling; Valuation; Underwriter; Venture capitalist; Academic entrepreneurship; Spinoff (search for similar items in EconPapers)
Date: 2019
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