The value-added function of VCs is very important to entrepreneurial firms, and is also a very essential issue in the venture capital field. The existing literature mainly focuses on the separation identification of VCs' value-added function and single-sided selection effect. This paper tries to identify double-sided selection effect and value-added function of VCs, and further explore the impact of VCs' value-added function on IPOs results. It applies 1623 samples of entrepreneurial firms invested by VCs from 1999 to 2009 and the data of the success of invested firms by June 30, 2016, to explore the exertion of value-added function of VCs. Considering fully the double-sided selection effect about more easy combination of good VCs and firms, it also explores possible value-added effects of VCs and entrepreneurial firms in the IPOs. Empirical analysis and robustness test show that good VCs cannot fully exert the value-added effect on entrepreneurial firms and do not have the significant effect on the promotion of IPOs, and the self advantages of entrepreneurial firms are actually the main determinant of easier success of IPOs. It provides a new perspective for us to understand the value-added function of VCs, and helps us to correctly know the behavioral characteristics and economic efficiency of VCs and entrepreneurial firms.
Do the Initial Public Offerings of Entrepreneurial Firms Depend on Firms Themselves or VCs? Empirical Evidence from the Perspective of Double-sided Selection Effect
Journal of Finance and Economics Vol. 43, Issue 05, pp. 130 - 144 (2017) DOI:10.16538/j.cnki.jfe.2017.05.010
Cite this article
Fu Hui, Zhou Fangzhao. Do the Initial Public Offerings of Entrepreneurial Firms Depend on Firms Themselves or VCs? Empirical Evidence from the Perspective of Double-sided Selection Effect[J]. Journal of Finance and Economics, 2017, 43(5): 130–144.
Previous: Stock Transfer Modes and Extreme Return Risks: Economic Consequences of the Introduction of Market Making Mechanism into the New Third Board