My Queen Mary master’s dissertation:
The purpose of this study is to evaluate the impact of venture capitalists on underpricing and post-IPO performance. A sample of venture capital (VC)-backed companies dating from 1992 to 2014 was compared with a sample of non-VC-backed firms from Germany and the United Kingdom. The long-term return analysis is computed with a buy-and-hold (BHR) approach. The cross-country comparison permits analysing the differences between the different financial systems in both countries. Consistent with previous studies, both types of companies are underpriced in the United Kingdom and Germany. Furthermore, VC-backed and non-VC- backed companies do not outperform the market in the long run. Both countries show similar patterns in both analyses. The overall difference between VC-backed and non-VC firms is not statistically significant. To support the results, a matching approach by propensity score matching was used. However, similar to the previous findings, there were also no statistically significant differences between VC-backed firms in the United Kingdom and Germany. Furthermore, although Germany is considered as a bank-based financial system and the UK as a stock-market financial system, there is no significant difference between both countries. In contrast to results from mainly US studies, this paper finds no evidence for a venture capitalist’s ability to certify the issuing price on the first trading day or for a significant impact on the post-IPO performance. The outcome of this study can be interpreted as evidence for the heterogeneity of the market of venture capitalists, and one can infer that the results of US research cannot be transferred to Europe.
My master’s dissertation “Venture capitalists’ impact on underpricing and post-IPO performance – Empirical evidence from the United Kingdom and Germany” was supervised by Hisham Farag. Drop me a line if you are interested in reading the paper.