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Venture Capital Reputation, Post-IPO Performance, and Corporate Governance

Published online by Cambridge University Press:  03 May 2011

C. N. V. Krishnan ,
Vladimir I. Ivanov ,
Ronald W. Masulis  and
Ajai K. Singh
C. N. V. Krishnan
Affiliation:
Weatherhead School of Management, Case Western Reserve University, Cleveland, OH 44106, cnk2@cwru.edu
Vladimir I. Ivanov
Affiliation:
Division of Risk, Strategy, and Financial Innovation, U.S. Securities and Exchange Commission, 100 F Street N.E., Washington, DC 20549, ivanovv@sec.gov
Ronald W. Masulis
Affiliation:
Australian School of Business, University of New South Wales, Sydney, NSW 2052, Australia, ron.masulis@unsw.edu.au
Ajai K. Singh
Affiliation:
College of Business and Economics, Lehigh University, 621 Taylor St., Bethlehem, PA 18015, aks411@lehigh.edu
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Abstract

We examine the association of a venture capital (VC) firm’s reputation with the post-initial public offering (IPO) long-run performance of its portfolio firms. We find that VC reputation, measured by the past market share of VC-backed IPOs, has significant positive associations with long-run firm performance measures. While more reputable VCs initially select better-quality firms, more reputable VCs continue to be associated with superior long-run performance, even after controlling for VC selectivity. We find that more reputable VCs exhibit more active post-IPO involvement in the corporate governance of their portfolio firms, and this continued VC involvement positively influences post-IPO firm performance.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 46 , Issue 5 , October 2011 , pp. 1295 - 1333
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2011

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