Dissertation/Thesis Abstract

Venture capital firm's reputation effect on its start-up company's long term operating performance and survivorship
by Yap, Huei Siang, M.Sc., Singapore Management University (Singapore), 2009, 110; 1478882
Abstract (Summary)

In this paper, I tested the effects of three proxies for venture capitalist (VC) reputation on its invested company’s long term industry-adjusted operating performances (ROA, ROE), market-to-book ratio and survival time (time to delisting) in the aftermarket. VC’s market share and VC’s IPO share have strong and positive association with the post-IPO long-term performance metrics, and the effects are statistically significant even after accounting for self-selection bias. For long term survivorship of start-up companies, I applied hazard analysis to the IPO company’s time to delisting with accelerated failure time (AFT) model as the baseline hazard function, and found that start up companies with backing from higher VC’s market share and VC’s IPO share VC firms tend to have lower hazard rate of de-listing. The expected time to delisting is also found to be much shorter in the pre-technology bubble period (1985-1996) compared to during and post-technology bubble period (1997-2007) for higher than median value reputable VCs. As the findings are robust even after controlling for business expansion and contraction cycles, this lend credence to the idea that during the technology bubble period, over optimism in VCs and too much uncommitted capital chasing after too few quality deals have resulted in reputable VC investing in mediocre quality companies. By cross-testing the effects of different quartiles of VC reputation proxy rankings on the long-run survivorship of the companies, VC market share is found to be the most consistent and effective amongst the proposed VC reputation proxies in explaining its effect on the IPO companies’ long-run survival.

Indexing (document details)
Advisor: Chua, Choong Tze
School: Singapore Management University (Singapore)
Department: Lee Kong Chian School of Business
School Location: Republic of Singapore
Source: MAI 48/06M, Masters Abstracts International
Subjects: Finance, Banking
Keywords: Financial performance, Initial public offering, Long-run returns, Rate of return, Stock exchange, Venture capitalist
Publication Number: 1478882
ISBN: 978-1-124-08530-2
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