The Impact of Venture Capital Holding on the Firms Life-cycle: Evidence from IPO Firms

44 Pages Posted: 14 Oct 2020

See all articles by Shima Amini

Shima Amini

University of Leeds; University of Leeds - Division of Accounting and Finance

Abdul Mohamed

University of Leeds - Leeds University Business School (LUBS)

Armin Schwienbacher

SKEMA Business School

Nick Wilson

University of Leeds - Credit Management Research Centre; Leeds University Business School

Date Written: October 13, 2020

Abstract

Venture capital firms often continue to stay as shareholders and on the board of directors of their investee companies even after they have gone public. This paper examines the impact of venture capital ownership beyond the IPO listing on important consequential, corporate decisions in a firm's lifetime, including time to dividend initiation. Using a sample of 1,409 US firms listed between 2000 and 2017, we find that venture capital firms delay the time to initiate dividends by approximately two years. The presence of venture capital firms further delays the use of external growth strategies (through acquisitions) and postpones the introduction to the corporate bond market while relying more quickly on seasoned equity offerings. Several robustness checks are performed, including controlling for possible reverse causality. These results are consistent with the view that venture capital firms extend the growth phase of the firms' life-cycle prior to becoming a mature firm. We further show that the presence of VC funds in the firm at time of these decisions leads to positive stock price reactions, suggesting they offer a certification effect for continued growth opportunities.

Suggested Citation

Amini, Shima and Mohamed, Abdul and Schwienbacher, Armin and Wilson, Nicholas, The Impact of Venture Capital Holding on the Firms Life-cycle: Evidence from IPO Firms (October 13, 2020). Proceedings of Paris December 2020 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: https://ssrn.com/abstract=3710522 or http://dx.doi.org/10.2139/ssrn.3710522

Shima Amini

University of Leeds ( email )

Leeds, LS2 9JT
United Kingdom

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom

Abdul Mohamed

University of Leeds - Leeds University Business School (LUBS) ( email )

Leeds LS2 9JT
United Kingdom

Armin Schwienbacher (Contact Author)

SKEMA Business School ( email )

Avenue Willy Brandt
Euralille, 59777
France

HOME PAGE: http://sites.google.com/view/armin-schwienbacher

Nicholas Wilson

University of Leeds - Credit Management Research Centre ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

Leeds University Business School ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

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