The authors wish to thank the editor Andy Stark and an anonymous referee for helpful and constructive comments that have resulted in a substantial improvement in the exposition of the paper.
Post-IPO Operating Performance, Venture Capital and the Bubble Years
Article first published online: 31 AUG 2007
Journal of Business Finance & Accounting
Volume 34, Issue 9-10, pages 1423–1446, November/December 2007
How to Cite
Coakley, J., Hadass, L. and Wood, A. (2007), Post-IPO Operating Performance, Venture Capital and the Bubble Years. Journal of Business Finance & Accounting, 34: 1423–1446. doi: 10.1111/j.1468-5957.2007.02055.x
- Issue published online: 31 AUG 2007
- Article first published online: 31 AUG 2007
- (Paper received November 2005, revised version accepted January 2007)
- venture capital;
- investor sentiment
Abstract: We analyse the post-issue operating performance of 316 venture-backed and 274 non-venture UK IPOs 1985–2003. The finding of a statistically significant five-year, operational decline exhibited over the full sample period is not robust. Rather it is driven by the dramatic underperformance during the 1998–2000 bubble years while IPOs perform normally in the remaining years. Cross-section regression results indicate support for venture capital certification in the non-bubble years but a significantly negative relationship between operating performance and venture capitalist board representation during the bubble years. The bubble year underperformance is explained by market timing and by low quality companies taking advantage of investor sentiment.