How useful is venture capital prestige? Evidence from IPO survivability

Ting-Kai Chou, Jia Chi Cheng, Chin Chen Chien

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

This study examines the effect of venture capitalist (VC) prestige on the post-issue survivability of IPOs and how VC characteristics influence the effect. We find that IPOs backed by prestigious VCs are less likely to delist for performance failure and have longer listing duration relative to those without VC backing; however, IPOs backed by ordinary VCs are as likely to delist as IPOs without VC backing. The finding is robust for Internet and high-tech firms. We further examine heterogeneous VC characteristics and find that the ability of prestigious VCs to improve IPO survival is a function of their investment experience and managerial ability. VC prestige characterized by industry specialization and syndication networks is not related to IPO survival. Overall, the results suggest that the VC characteristics that produce prestige, rather than the prestige itself, drive the long-term survival of IPOs.

Original languageEnglish
Pages (from-to)843-863
Number of pages21
JournalSmall Business Economics
Volume40
Issue number4
DOIs
Publication statusPublished - 2013 Jan 1

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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