The effects of venture capital syndicate diversity on earnings management and performance of IPOs in the US and UK: An institutional perspective

Chahine, Salim; Arthurs, Johnathan D.; Filatotchev, Igor; Hoskisson, Robert E.

doi:10.1016/j.jcorpfin.2011.11.007

Cited by 99 publications

(81 citation statements)

References 48 publications

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“…Hence VCs are relatively short-term investors who are likely to be seeking at IPO to realize their gains from their value-adding activities for the venture , as well as to establish their reputation in order to raise further funds. Th ese results are in line with fi ndings in Chahine and Filatotchev ( 2008 ), who show that bankaffi liated VCs lead to a poorer IPO performance in France.…”

Section: Venture Capitalists and "Certification Hypothesis"supporting

confidence: 88%

“…Th ere is growing recognition that governance and the operation of VC fi rms may depend on the institutional environment ( Chahine et al, 2012 ;Black and Gilson, 1998 ;Jeng and Wells, 2000 ). Further research might usefully extend analysis of the role of risk fi nanciers in other institutional contexts, such as countries associated with network-based corporate governance systems ( La Porta et al, 1997 ).…”

Section: Discussion and Future Researchmentioning

confidence: 99%

“…More generally, an increasing number of studies suggest that agency problems may be diff erent in diff erent national settings and imply that researchers should integrate the agency framework with institutional analysis to generate robust predictions ( Chahine et al, 2012 ). Future research should expand on this concept further and seek to more explicitly examine the nature of agency confl icts and their implications in diff erent institutional settings ( Aguilera and Jackson, 2003 ).…”

Section: Discussion and Future Researchmentioning

confidence: 99%

“…Th is suggests the existence of a potential confl ict of interests between VC fi rms and the IPO fi rm. In addition, following Arthurs et al 's ( 2008 ) confl icting voices argument, VCs have a dual identity as both principals and agents. Th ese investors are oft en part of limited partnerships that place pressure on them to obtain fast results and to seek a timely realization of their investment.…”

Section: Venture Capitalists and "Certification Hypothesis"mentioning

confidence: 99%

“…Prior research approximates this discount by a lower industry-adjusted off er price/book or price/sales ratios (e.g. Chahine and Filatotchev, 2008 ), while others associate it with greater underpricing, measured by the diff erence between the fi rst-day-trading closing price and the off er price (e.g. Daily et al, 2003 ), suggesting that the aft ermarket price provides a good proxy for an intrinsic value of the IPO fi rm.…”

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confidence: 99%

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Corporate Governance in IPOs

Filatotchev

Allcock

2013

Oxford Handbooks Online

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corporate governance in ipos 423 investors ( Bruton et al., 2010 ). An entrenched founder-CEO may also try to retain a leadership position even when his/her skills become inadequate to new challenges faced by the fi rm ( Nelson, 2003 ). As a result of these information asymmetries, there are potential agency costs when a fi rm experiences an IPO since managers may not reveal actions within the fi rm or do not take certain actions that maximize the fi rm benefi t ( Sanders and Boivie, 2004 ).At IPO investors recognize the potential impact of the agency costs associated with information asymmetries, and they will therefore anticipate potential agency costs and price-protect themselves, thus leading to an IPO discount. Prior research approximates this discount by a lower industry-adjusted off er price/book or price/sales ratios (e.g. Chahine and Filatotchev, 2008 ), while others associate it with greater underpricing, measured by the diff erence between the fi rst-day-trading closing price and the off er price (e.g. Daily et al., 2003 ), suggesting that the aft ermarket price provides a good proxy for an intrinsic value of the IPO fi rm. Some researchers, however, argue that the uncertainties and information asymmetries cannot be resolved on the fi rst day of trading, and suggest using longer-term proxies for the stock market discount ( Aggarwal and Rivoli, 1990 ; Loughran et al., 1994 ).However, the IPO team may use corporate governance-related signals that allow potential investors to better understand the true value of the fi rm and reduce risks of agency problems, which in turn can improve the IPO fi rm's performance ( Sanders and Boivie, 2004 ). Corporate governance studies in the IPO context have recognized a wide range of potential "good governance signals" that include board characteristics, executive incentives, and the governance roles of early stage investors. Th ese governance factors play a dual role in addressing two types of agency confl icts in an IPO fi rm. First, they may convey important signals about the "quality" of IPO fi rm, and this may reduce the extent of adverse selection problems. For example, by attracting prestigious and experienced independent board members, an IPO fi rm can diff erentiate itself from other "poor quality" IPOs. At the same time, these independent directors may improve the extent and quality of monitoring, which imposes constraints on managerial discretion and reduces moral hazard-type agency confl icts. Likewise, venture capitalist may play important certifi cation and monitoring roles that aff ect both types of agency confl icts. By carefully selecting their investment targets, they certify the quality of fi rms they bring to the stock market. In addition, venture capitalists (VCs) oft en retain their ownership aft er the fl otation, and their objectives and post-issue monitoring incentives may be aligned with public market investors ( Bruton et al., 2010 ).A central premise of this research is that corporate governance factors may be important signals to investors w...

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Section: Venture Capitalists and "Certification Hypothesis"supporting

confidence: 88%

Section: Discussion and Future Researchmentioning

confidence: 99%

Section: Discussion and Future Researchmentioning

confidence: 99%

Section: Venture Capitalists and "Certification Hypothesis"mentioning

confidence: 99%

mentioning

confidence: 99%

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Corporate Governance in IPOs

Filatotchev

Allcock

2013

Oxford Handbooks Online

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Whose firm is it anyway? Analyzing ownership effects on IPO performance

Sur

Martens

2013

Can J Adm Sci

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This study revisits current practice that ownership holding at IPO has a homogeneous impact on IPO performance. Using signalling theory, we develop and test a conceptual model explaining the relationships between the aggregated ownership structure and IPO price premium. We argue that aggregated ownership has a direct effect on issue price premium, and offer specific hypotheses on the effect of the shares sold during the offering by each type of owner on IPO performance. We use archival data from a sample of US firms that issued IPOs between 1996 and 2000 and find a significant direct effect of ownership configuration, namely, heterogeneity in effect of each ownership type on IPO performance as well as interaction effects between different ownership types. Copyright © 2013 ASAC. Published by John Wiley & Sons, Ltd.Keywords: initial public offering, ownership, issue price premium, signalling theory, aggregated ownership Résumé Cette étude réexamine la pratique courante qui veut que la possession d'un droit de propriété à l'IPO ait un impact homogène sur la performance de l'IPO. À partir de la théorie de la signalisation, l'étude met au point et teste un modèle conceptuel qui rend compte des relations entre la structure de la propriété globale et le cours de l'IPO. Elle soutient que la propriété globale a un impact direct sur le prix émis et propose des hypothèses précises sur l'effet des actions vendues, pendant l'offre par chaque type de propriétaire, sur la performance de l'IPO. Les données d'archive utilisées proviennent d'un échantillon de firmes américaines émettrices d'IPOs entre 1996 et 2000. Les résultats mettent en évidence un effet direct significatif de la configuration de la propriété, notamment de l'hétérogénéité de chaque type de propriété sur la performance de l'IPO. Ils démontrent aussi les effets d'interaction qu'il y a entre les différents types de propriété.

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The Effects of Intra‐industry and Extra‐industry Networks on Performance: A Case of Venture Capital Portfolio Firms

2013

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Citation: Bellavitis, C., Filatotchev, I. and Kamuriwo, D. S. (2014). The effects of intraindustry and extra-industry networks on performance: A case of venture capital portfolio firms. Managerial and Decision Economics, 35(2), pp. 129-144. doi: 10.1002/mde.2647 This is the accepted version of the paper.This version of the publication may differ from the final published version. However, interaction effects show that once a firm establishes a sufficient number of extra-industry ties, it is able to profit from the network in its industry of operation. PermanentOverall, these findings show that an optimal balance of ties is achieved through a diverse set of connections incorporating both intra-and extra-industry ties.

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The effects of venture capital syndicate diversity on earnings management and performance of IPOs in the US and UK: An institutional perspective

Cited by 99 publications

References 48 publications

Corporate Governance in IPOs

Corporate Governance in IPOs

Whose firm is it anyway? Analyzing ownership effects on IPO performance

The Effects of Intra‐industry and Extra‐industry Networks on Performance: A Case of Venture Capital Portfolio Firms

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