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Institutional Affiliation and the Role of Venture Capital : Evidence from Initial Public Offerings in Japan, Research Paper 9807

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Institutional Affiliation and the Role of Venture Capital : Evidence from Initial Public Offerings in Japan, Research Paper 9807

DATE: April 1998

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ABSTRACT: The presence of venture capital in the ownership structure of U.S. firms going public has been associated with both improved long-term performance and lower underpricing at the time of the IPOs. In Japan, we find the long-run performance of venture capital-backed IPOs to be no better than that of other IPOs. Many of the major venture capital firms in Japan are subsidiaries of securities firms that may face a conflict of interest when underwriting the venture capital-backed issue. When venture capital holdings are broken down by their institutional affiliation, we find that firms with venture backing from securities company subsidiaries perform significantly worse over a three-year time horizon than other IPOs. We also find that IPOs in which the lead venture capitalist is also the lead underwriter have higher initial returns than other venture capital-backed IPOs, and sell at higher P/E ratios than comparable listed stocks. These results suggest that conflicts of interest influence the pricing and long-run performance of initial public offerings in Japan.

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Hamao, Yasushi , Packer, Frank and Ritter, Jay R. (Jay Rial), 1954-. "Institutional Affiliation and the Role of Venture Capital : Evidence from Initial Public Offerings in Japan, Research Paper 9807," Research Papers (Federal Reserve Bank of New York) (April 1998). https://fraser.stlouisfed.org/title/6570/item/615613, accessed on March 31, 2023.

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SUBJECTS:

THEMES: CLASSIFICATION:
  • lcc: HG136 .R45 no.9807
IDENTIFIERS:
  • oclc: 39193608
  • repec: fip:fednrp:9807
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