Agency Problems and the Performance of Venture-backed IPOs in Germany: Exit Strategies, Lock-up Periods, and Bank Ownership

Wolfgang Bessler and Andreas Kurth

The European Journal of Finance, 2007, vol. 13, issue 1, 29-63

Abstract: The agency problems for initial public offerings are well documented in the literature. The objective of this research is to investigate the potential conflicts of interest for the 'Neuer Markt' in Germany. Of special interest are venture-backed IPOs and those in which banks acted as venture capitalist, underwriter, and provided analyst recommendations. High initial returns and outperformance are observed over the first 6 months of trading, which decreases significantly over the subsequent 18 months. The individual performance depends on the VC's underwriter and bank affiliation, exit behaviour, and lock-up commitment. Venture capitalists, and especially banks, timed their exit well. This indicates some serious agency problems in the German IPO market.

Keywords: Initial public offerings; venture capital; agency problems; bank equity ownership (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (14)

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DOI: 10.1080/13518470600763661

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