Journal of Finance Vol. 75 No. 3 2020
Venturing beyond the IPO: Financing of Newly Public Firms by Venture Capitalists
Abstract
Contrary to conventional wisdom, we document that approximately 15% of venture capitalist (VC)‐backed firms raise additional capital from VCs in the five years after going public. We propose two explanations for why firms revert to VC financing post‐IPO (initial public offering). First, we hypothesize that VC participation in post‐IPO financing represents an efficient solution to informational problems that would otherwise constrain firms’ abilities to exploit value‐increasing investments. Analyses of firm and VC characteristics, together with the finding that these investments are value‐increasing for both VCs and the underlying companies, support this hypothesis. We find no support for the alternative that agency conflicts motivate these investments.
- DOI
- 10.1111/jofi.12879
- Volume
- 75
- Issue
- 3
- Pages
- 1527-1577
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref