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Erschienen in: Review of Quantitative Finance and Accounting 4/2011

01.05.2011 | Original Research

The reputation effect of venture capital

verfasst von: Pei-Gi Shu, Yin-Hua Yeh, Shean-Bii Chiu, Fu-Sheng Ho

Erschienen in: Review of Quantitative Finance and Accounting | Ausgabe 4/2011

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Abstract

The main purpose of this paper to examine how the reputation effect of venture capital (VC) is associated with the initial return and ex-post performance of its invested IPO firms. In this paper, we use 267 Taiwanese IPO firms in 1994–2007 periods and find that VC-backed firms outperform non-VC-backed firms in terms of ex-post equity market-to-book ratio, ROA and R&D expenditure ratio. For those VC-backed IPOs, reputable VC-backed firms outperform mediocre VC-backed ones. Moreover, among the four proxies of VC reputation, the market share with respect to total IPO proceeds is most promising in explaining IPO firms’ ex-post performance. The overall result confirms the reputation effect associated with VC.

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Fußnoten
1
The tax incentive was under different titles: the Investment Encouragement Act (IEA) during 1980s and the Industrial Upgrade Promotion Act (IUPA) during the 1990s.
 
2
For example, several studies use a similar concept to gauge the reputation effect of underwriter (e.g. Johnson and Miller 1988; Megginson and Weiss 1991; Carter and Manaster 1990; Carter et al. 1998; Loughran and Ritter 2004). A recent study of Nahata (2008) who uses IPO capitalization share to proxy for VC reputation effect is closely related to our market share proxies.
 
3
We also stratify the sample into three groups by including a “medium reputation” category. The result of contrasting the variables between high- and low-reputed VCs after including a medium reputation category remains intact.
 
4
Hartnett (2006) indicate that a level of ‘disclosure management’ regarding company IPO forecasts and normalized historic accounting data, with forecast overestimation and error size more extreme when the monitoring expertise and/or reputation of auditors is lower.
 
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Metadaten
Titel
The reputation effect of venture capital
verfasst von
Pei-Gi Shu
Yin-Hua Yeh
Shean-Bii Chiu
Fu-Sheng Ho
Publikationsdatum
01.05.2011
Verlag
Springer US
Erschienen in
Review of Quantitative Finance and Accounting / Ausgabe 4/2011
Print ISSN: 0924-865X
Elektronische ISSN: 1573-7179
DOI
https://doi.org/10.1007/s11156-010-0188-x

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