The reputation effect of venture capital
Journal
Review of Quantitative Finance and Accounting
Journal Volume
36
Journal Issue
4
Pages
533
Date Issued
2011-05-01
Author(s)
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. © 2010 Springer Science+Business Media, LLC.
Subjects
Initial public offerings | Reputation effect | Venture capital
Type
journal article