Institutional affiliation and the role of venture capital: evidence from initial public offerings in Japan
Frank Packer () and
Jay Ritter ()
No 9807, Research Paper from Federal Reserve Bank of New York
The presence of venture capital in the ownership structure of U.S. firms going public has been associated with both improved long-term performance and lower underpricing at the time of the IPOs. In Japan, we find the long-run performance of venture capital-backed IPOs to be no better than that of other IPOs. Many of the major venture capital firms in Japan are subsidiaries of securities firms that may face a conflict of interest when underwriting the venture capital-backed issue. When venture capital holdings are broken down by their institutional affiliation, we find that firms with venture backing from securities company subsidiaries perform significantly worse over a three-year time horizon than other IPOs. We also find that IPOs in which the lead venture capitalist is also the lead underwriter have higher initial returns than other venture capital-backed IPOs, and sell at higher P/E ratios than comparable listed stocks. These results suggest that conflicts of interest influence the pricing and long-run performance of initial public offerings in Japan.
Keywords: Business enterprises - Japan; Venture capital; Japan (search for similar items in EconPapers)
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Journal Article: Institutional affiliation and the role of venture capital: Evidence from initial public offerings in Japan (2000)
Working Paper: Institutional affiliation and the role of venture capital: evidence from initial public offerings in Japan (1999)
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