Abstract
This paper examines changes in profitability of 146 Companies financed by Venture Capital (CVC) listed on the French market. The results show disappointing post-IPO profitability. The decline in performance ranges from 9.5 % to 32 % over a 2-year period following the launch on the stock exchange. It also appears that the decline in operating performance is less significant for CVC compared with non CVC over the same period. An analysis of this underperformance shows that CVC supported by reputed venture capital firms manage to limit the decline in operating performance compared to those supported by non-reputed venture capital firms.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Earnings before Interest, Taxes, Depreciation, and Amortization.
- 2.
Standard Industrial Classification.
- 3.
The ten leading VCF also correspond to firms with at least 3 % of market share.
- 4.
References
Baker M, Gompers P (2003) The determinants of board structure at the initial public offering. J Law Econ 46:569–598
Barber BM, Lyon JD (1996) Detecting abnormal operating performance: the empirical power and specification of test statistics. J Financ Econ 41:359–399
Brav A, Gompers PA (1997) Myth or reality? The long-run underperformance of initial public offerings: evidence from venture and non-venture capital-backed companies. J Finance 52(5):1791–1821
Espenlaub S, Garrett I, Mun WP (1999) Conflicts of interest and the performance of venture-capital-backed IPOs: a preliminary look at the UK. Venture Cap 1(4):325–349
Field L, Hanka G (2001) The expiration of IPO share lockups. J Finance 56(2):471–500
Gompers PA, Lerner J (1999) What drives venture capital fundraising? NBER working papers 6906, National Bureau of Economic Research
Harris R, Murray G, Niu D (2006) The operating performance of buyout IPOs in the UK and the influence of private equity financing. Working paper University of Exeter
Hege U, Palomino F, Schwienbacher A (2003) Determinants of venture capital performance: Europe and the United States. Risk capital and the financing of European innovative firms, LSE-RICAFE working paper no 1
Hellmann T, Puri M (2002) Venture capital and the professionalization of start-up firms: empirical evidence. J Finance 57(1):169–197
Ivanov V, Krishnan CNV, Masulis W, Singh K (2009) Venture capital reputation and post-IPO performance. New Orleans meetings paper
Jain B, Kini O (1994) The post-issue operating performance of IPO firms. J Finance 49(5):1699–1726
Jain B, Kini O (1995) Venture capitalist participation and the post-issue operating performance of IPO firms. Manage Decis Econ 16(6):593–606
Jelic R, Saadouni B, Wright M (2005) Performance of private to public MBOs: the role of venture capital. J Bus Finance Acc 32:643–681
Jensen M, Meckling W (1976) Theory of the firm: managerial behavior, agency costs and ownership structure. J Financ Econ 3(4):305–360
Jung K, Kim CK, Stulz R (1996) Timing, investment opportunities, managerial discretion, and the security issue decision. J Financ Econ 42:159–185
Krigman L, Shaw W, Womack K (1999) The persistence of IPO mispricing and the predictive power of flipping. J Finance 54(3):1015–1044
Landier A (2001) Start-up financing: banks vs. venture capital. Mimeo MIT. Cambridge, USA
Lerner J (1994) Venture capitalists and the decision to go public. J Financ Econ 35:293–316
Lin T, Smith R (1998) Insider reputation and selling decisions: the unwinding of venture capital investments during equity IPOs. J Corp Finance 4(3):241–263
Ljungqvist A, Nanda V, Singh R (2006) Hot markets, investor sentiment, and IPO pricing. J Bus 79:1667–1702
Loughran T, Ritter J (1995) The new issues puzzle. J Finance 50(1):23–51
Loughran T, Ritter J (1997) The operating performance of firms conducting seasoned equity offering. J Finance 52(5):1823–1850
Megginson WL, Weiss KA (1991) Venture capitalists certification in initial public offering. J Finance 46:879–903
Miller E (1977) Risk, uncertainty and divergence of opinion. J Finance 32(4):1151–1168
Ofek E, Richardson M (2002) The valuation and market rationality of Internet stock prices. Oxford Review of Economic Policy 18(3):265–287
Pastor L, Veronesi P (2005) Rational IPO waves. J Finance 60(4):1713–1757
Rindermann G (2003) Venture capitalist participation and the performance of IPO firms. Empirical evidence from France, Germany and the UK. European University Studies, vol 3029
Ritter JR (1991) The long-run performance of initial public offerings. J Finance 46(1):365–394
Sapienza H, Manigart S, Vermeir W (1996) Venture capitalist governance and value added in four countries. J Bus Ventur 11:439–469
Sentis P (2001) Les performances opérationnelles et boursières des introductions en Bourse: le cas français 1991–1995. Finance 22:87–118
Timmons J, Bygrave W (1986) Venture capital’s role in financing innovation for economic growth. J Bus Ventur 1:161–176
Wood A, Coakley J, Hadass L (2007) Post-IPO operating performance, venture capital and the bubble years. J Bus Finance Acc 34:1423–1446
Wright M, Manigart S, De Waele K, Robbie K, Sapienza H, Beekman A (2002) Determinants of required return in venture capital investments: a five country study. J Bus Ventur 17:291–312
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2015 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Khalfallah, M., Sahut, JM. (2015). What Happed to Companies Backed by Venture Capital Following IPO?. In: Peris-Ortiz, M., Sahut, JM. (eds) New Challenges in Entrepreneurship and Finance. Springer, Cham. https://doi.org/10.1007/978-3-319-08888-4_6
Download citation
DOI: https://doi.org/10.1007/978-3-319-08888-4_6
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-08887-7
Online ISBN: 978-3-319-08888-4
eBook Packages: Business and EconomicsBusiness and Management (R0)