The role of venture capital in the creation of public companies. Evidence from the going-public process

Christopher B. Barry; Chris J. Muscarella; John W. Peavy; Michael R. Vetsuypens

doi:10.1016/0304-405X(90)90064-7

The role of venture capital in the creation of public companies. Evidence from the going-public process

Christopher B. Barry
, Chris J. Muscarella
, John W. Peavy
, Michael R. Vetsuypens

Finance

Research output: Contribution to journal › Article › peer-review

725 Scopus citations

Abstract

We examine an exhaustive set of initial public offerings (IPOs) by venture-capital-backed companies between 1978 and 1987. We find that venture capitalists specialize their investments in firms to provide intensive monitoring services. Consistent with their monitoring role, the venture capitalists take concentrated equity positions, maintain their investment beyond the IPO, and serve on the boards of their portfolio firms. The quality of their monitoring services appears to be recognized by capital markets through lower underpricing for IPOs with better monitors.

Original language	English (US)
Pages (from-to)	447-471
Number of pages	25
Journal	Journal of Financial Economics
Volume	27
Issue number	2
DOIs	https://doi.org/10.1016/0304-405X(90)90064-7
State	Published - Oct 1990

All Science Journal Classification (ASJC) codes

Accounting
Finance
Economics and Econometrics
Strategy and Management

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10.1016/0304-405X(90)90064-7

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abstract = "We examine an exhaustive set of initial public offerings (IPOs) by venture-capital-backed companies between 1978 and 1987. We find that venture capitalists specialize their investments in firms to provide intensive monitoring services. Consistent with their monitoring role, the venture capitalists take concentrated equity positions, maintain their investment beyond the IPO, and serve on the boards of their portfolio firms. The quality of their monitoring services appears to be recognized by capital markets through lower underpricing for IPOs with better monitors.",

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The role of venture capital in the creation of public companies. Evidence from the going-public process

Abstract

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