The sharemarket performance of Australian venture capital-backed and non-venture capital-backed IPOs

Ray da Silva Rosa; Gerard Velayuthen; Terry Walter

doi:10.1016/S0927-538X(02)00114-2

The sharemarket performance of Australian venture capital-backed and non-venture capital-backed IPOs

Ray da Silva Rosa, Gerard Velayuthen, Terry Walter^*

^*Corresponding author for this work

Macquarie Business School

Research output: Contribution to journal › Review article › peer-review

54 Citations (Scopus)

Abstract

We assess the initial underpricing and long-run share performance of venture capital (VC)-backed IPOs. We find, as expected, that estimates of underpricing are less severe using Habib and Ljungqvist [Economics Letters 61 (1998) 381] inspired measures that more accurately estimate the true wealth loss to the entrepreneur. However, we find no statistically significant difference in the underpricing of VC backed and non-VC backed IPOs. Further, unlike Lee et al. [Journal of Banking and Finance 20 (1996) 1189], we find that Australian IPOs do not underperform in the after-market. Non-VC capitalbacked and VC-backed firms earn normal returns in the 2 years following listing. Our results are inconsistent with the hypothesis that VC-backed IPOs are certified as high quality by mere virtue of being backed by venture capitalists.

Original language	English
Pages (from-to)	197-218
Number of pages	22
Journal	Pacific-Basin Finance Journal
Volume	11
Issue number	2
DOIs	https://doi.org/10.1016/S0927-538X(02)00114-2
Publication status	Published - Apr 2003

Keywords

IPO
Long-run performance
Underpricing
Venture capital

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10.1016/S0927-538X(02)00114-2

Cite this

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AB - We assess the initial underpricing and long-run share performance of venture capital (VC)-backed IPOs. We find, as expected, that estimates of underpricing are less severe using Habib and Ljungqvist [Economics Letters 61 (1998) 381] inspired measures that more accurately estimate the true wealth loss to the entrepreneur. However, we find no statistically significant difference in the underpricing of VC backed and non-VC backed IPOs. Further, unlike Lee et al. [Journal of Banking and Finance 20 (1996) 1189], we find that Australian IPOs do not underperform in the after-market. Non-VC capitalbacked and VC-backed firms earn normal returns in the 2 years following listing. Our results are inconsistent with the hypothesis that VC-backed IPOs are certified as high quality by mere virtue of being backed by venture capitalists.

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The sharemarket performance of Australian venture capital-backed and non-venture capital-backed IPOs

Abstract

Keywords

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