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Institutional affiliation and the role of venture capital: evidence from initial public offerings in Japan

Yasushi Hamao, Frank Packer () and Jay Ritter ()

No 9807, Research Paper from Federal Reserve Bank of New York

Abstract: 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)
Date: 1998
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Related works:
Journal Article: Institutional affiliation and the role of venture capital: Evidence from initial public offerings in Japan (2000) Downloads
Working Paper: Institutional affiliation and the role of venture capital: evidence from initial public offerings in Japan (1999) Downloads
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