Size and diversity in VC syndicates and their impact on IPO performance

Falconieri, S., Filatotchev, I. and Tastan, M. 2019. Size and diversity in VC syndicates and their impact on IPO performance. European Journal of Finance. 25 (11), pp. 1032-1053. doi:10.1080/1351847X.2018.1560345

TitleSize and diversity in VC syndicates and their impact on IPO performance
TypeJournal article
AuthorsFalconieri, S., Filatotchev, I. and Tastan, M.
Abstract

This paper investigates the impact of venture capital (VC) syndicate size and composition on the IPO and post-IPO performances of investee companies in an attempt to shed some light on the extent to which larger and more diverse syndicates are more likely to suffer from internal agency problems which might hinder the decision making process and lead to less value added for their portfolio companies. The question is of great relevance because, while the vast majority of the empirical literature compares VC backed IPOs with non VC backed ones, most VC funding is provided by syndicates of two or more financiers.
We construct alternative measures of size as well as diversity based on several VC characteristics such as age, geographic location, type and affiliation of VC firms and find that larger and more diverse syndicates are associated with higher underpricing and lower valuation at the IPO date. Furthermore we provide evidence that that diversity and size are negatively correlated to the long term performance of the IPO firms and this finding is robust to several alternative measures of long term performance.

KeywordsIPO, VC Size, Underpricing, Diversity
JournalEuropean Journal of Finance
Journal citation25 (11), pp. 1032-1053
ISSN1351-847X
Year2019
PublisherTaylor & Francis
Digital Object Identifier (DOI)doi:10.1080/1351847X.2018.1560345
Publication dates
Published online31 Dec 2018
Published in print2019

Related outputs

The role of admission documents on the pricing of UK fixed priced IPOs
Falconieri, S. and Tastan, M. 2018. The role of admission documents on the pricing of UK fixed priced IPOs. Economics Letters. 173, pp. 44-46. doi:10.1016/j.econlet.2018.09.007

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