Examination of 41 closed-end fund intial public offerings (IPOs) during the period from January 1986 to June 1987 reveals that the mean intial day's return is not significantly different from zero in contrast to previous findings for nonfund IPOs. New funds also show significant negative after- market returns unlike other new issues. Despite the disparity between our findings and previous results, our results are consistent with existing models. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

We examine an exhaustive set of initial public offerings (IPOs) by venture-capital-backed companies between 1978 and 1987. We find that venture capitalists specialize their investments in firms to provide intensive monitoring services. Consistent with their monitoring role, the venture capitalists take concentrated equity positions, maintain their investment beyond the IPO, and serve on the boards of their portfolio firms. The quality of their monitoring services appears to be recognized by capital markets through lower underpricing for IPOs with better monitors.