1. Pre-IPO growth, venture capital, and the long-run performance of IPOs
- Author
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Jiangjing Que and Xueyong Zhang
- Subjects
Economics and Econometrics ,050208 finance ,Incentive ,0502 economics and business ,05 social sciences ,Economics ,Matched sample ,Profitability index ,Monetary economics ,050207 economics ,Venture capital ,Baseline (configuration management) ,Initial public offering - Abstract
This paper analyzes the relationship between pre-IPO growth and the post-IPO long-run performance for venture capital (VC)-backed firms. Our results show that the effect of pre-IPO growth on post-IPO long-run performance is positive, but is attenuated by venture capital in a matched sample. Focusing on VC-backed IPO firms, we find an inverted-U relationship between pre-IPO growth and post-IPO long-run performance. In addition, our baseline results continue to hold in a variety of settings, including post-IPO profitability performance and ownership divisions of venture capital. We explore one underlying interpretation through which post-IPO long-run performance exhibits a reversal when pre-IPO growth increases to a saturation point: VC-backed firms tend to engage in accounting fraud due to the incentives from some opportunistic VCs to take firms public earlier.
- Published
- 2019
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