Financial Sponsors, Underpricing, and Long-run Performance – Venture Capital- versus Private Equity-backed IPOs

Wirtschaftswissenschaften

Hadrys, Christoph, Mietzner, Mark, Schiereck, Dirk

Financial Sponsors, Underpricing, and Long-run Performance – Venture Capital- versus Private Equity-backed IPOs

Hadrys, Christoph, Mietzner, Mark, Schiereck, Dirk: Financial Sponsors, Underpricing, and Long-run Performance – Venture Capital- versus Private Equity-backed IPOs, Journal of International Finance and Economics, 2010; Jg. 10 (3): 29-43.

Originalarbeiten in wissenschaftlichen Fachzeitschriften mit Review-Verfahren

This paper examines the certification role of venture capital and private equity investors in European IPOs. Their target companies are associated with different levels of asymmetric information, but there are doubts that the certification role associated with these financial specialists leads to similar results among all groups of financial sponsors. We argue that underpricing should diverge among sponsors. Controlling for size and different levels of asymmetric information associated with the respective IPO, we find that venture capital-backed IPOs experience larger first-day returns than private-equity backed IPOs. We consider the long-term performance of venture capital-backed IPOs, and find evidence that it does not differ from private equity-backed IPO returns. However, long-term market performance of venture capital-backed IPOs can only be explained by market- and issue-specific effects. Long-term returns of private equity-financed firms are determined by leverage, growth opportunities, underwriter reputation and market environment. Size and industry effects, as well as operational performance, do not significantly impact long-term performance.

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