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Venture capital investments, exits and post-IPO performance

Martinovic, Milan (2015) Venture capital investments, exits and post-IPO performance. PhD thesis, The London School of Economics and Political Science (LSE).

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Abstract

Chapter 1. We examine the determinants of success in venture capital transactions using the largest deal-level data set to date, with special emphasis on comparing European to US transactions. Using survival analysis, we show that for both regions the probability of exit via initial public offering (IPO) has gone down significantly over the last decade, while the time to IPO has gone up – in contrast, the probability of exit via trade sales and the average time to trade sales do not change much over time. Contrary to perceived wisdom, there is no difference in the likelihood or profitability of IPOs between European and US deals from the same vintage year. However, European trade sales are less likely and less profitable than US trade sales. Venture success has the same determinants in both Europe and US, with more experienced entrepreneurs and venture capitalists being associated with higher success. The fact that repeat or ‘serial’ entrepreneurs are less common in Europe and that European VCs lag US VCs in terms of experience completely explains any difference in performance between Europe and the US. Also, contrary to perceived wisdom, we find no evidence of a stigma of failure for entrepreneurs in Europe. Chapter 2. Association of insiders’ selling decision of VC-backed initial public offerings (IPOs) with the post-IPO long-run performance is analyzed. I find that the selling decision by insiders, measured as a fraction of shares sold by the selling stockholders to total shares sold in the offering, has significant positive association with the long-run profitability and negative association with the risk after the IPO. Furthermore, when venture capitalists sell shares in the IPO there is positive concave parabolic association between the selling decision and the post-IPO long-run market performance. However, venture capitalists selling of over-allotted shares and stock redemptions are not associated with superior post-IPO performance. Evidence on selling decision of venture capitalists confirms the importance of reputation as a factor affecting insiders’ selling decisions.

Item Type: Thesis (PhD)
Additional Information: © 2015 Milan Martinovic
Library of Congress subject classification: H Social Sciences > HG Finance
Sets: Departments > Finance
Supervisor: Axelson, Ulf and Paravisini, Daniel
URI: http://etheses.lse.ac.uk/id/eprint/3232

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