Myth or reality? The long-run underperformance of initial public offerings: Evidence from venture and nonventure capital-backed companies
Journal Article (Journal Article)
We investigate the long-run underperformance of recent initial public offering (IPO) firms in a sample of 934 venture-backed IPOs from 1972-1992 and 3,407 nonventure-backed IPOs from 1975-1992. We find that venture-backed IPOs outperform non-venture-backed IPOs using equal weighted returns. Value weighting significantly reduces performance differences and substantially reduces underperformance for nonventure-backed IPOs. In tests using several comparable benchmarks and the Fama-French (1993) three factor asset pricing model, venture-backed companies do not significantly underperform, while the smallest nonventure-backed firms do. Underperformance, however, is not an IPO effect. Similar size and book-to-market firms that have not issued equity perform as poorly as IPOs.
Full Text
Duke Authors
Cited Authors
- Brav, A; Gompers, PA
Published Date
- January 1, 1997
Published In
Volume / Issue
- 52 / 5
Start / End Page
- 1791 - 1821
International Standard Serial Number (ISSN)
- 0022-1082
Digital Object Identifier (DOI)
- 10.1111/j.1540-6261.1997.tb02742.x
Citation Source
- Scopus