Do Venture Capitalists Add Value to Small Manufacturing Firms? An Empirical Analysis of Venture and Nonventure Capital-Backed Initial Public Offerings
Posted: 24 Nov 2009
Date Written: 2004
Abstract
Researchers have completed a few studies to determine if performance differences exist between venture capital-backed firms and nonventure-backed firms.This research attempts to extend this research through further exploration of the following three areas:1) small businesses that performed an initial public offering (IPO) from 1990-96; 2) manufacturers that achieved an IPO; and 3) four dimensions utilized to determine IPO success, including initial underpricing, stock performance, sales growth, and survivability. The data for this study are collected from the Security Data Company's (SDC) new issues database, and the criteria required of subjects of this study are described, including being listed on the Center for Research in Security Prices (CRSP) database.After using the screening criteria, the qualifying VC-backed IPOs were identified, and similar criteria were used to create a control sample.A description of the univariate and multivariate analyses of the data regarding IPO performance is provided. Following the data analysis, no evidence existed to support either hypothesis, indicating that difference existed between the initial underpricing, three-year sales growth, three-year cumulative stock returns, and three-year survivability between VC and nonVC-backed IPOs.(AKP)
Keywords: Experimental/primary research, Firm performance, Public firms, Financing, Venture capital, Public offerings, Manufacturing industries, Survival rates, Initial public offerings (IPO)
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