Performance of private to public MBOs: the role of venture capital

Jelic, Ranko, Saadouni, Brahim and Wright, Mike (2005) Performance of private to public MBOs: the role of venture capital. Journal of Business Finance and Accounting, 32 (3-4). pp. 643-681. ISSN 0306-686X

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Using a unique dataset, we examine financial performance, arid venture capital involvement in 167 MBOs exiting through IPOs (MBO-IPOs) on the London Stock Exchange, during the period 1964 -1997. VC backed MBOs seem to be more underpriced than MBOs without venture capital backing, based on average value-weighted returns. MBOs backed by highly reputable VCs tend to be older companies, and exit earlier than MBOs backed by less reputable VCs. The results contradict 'certification' and 'grandstanding' hypotheses supported by US data (Meggirison arid Weiss, 1991; arid Gompers, 1996, respectively). We found no evidence of either significant underperformance, or that VC backed MBOs perform better than their non-VC backed counterparts in the long run. However, MBOs backed by highly reputable venture capital firms seem to be better long-term investments as compared to those backed by less prestigious venture capitalist firms. The results remain robust after using different methods to measure performance, and after controlling for sample selectivity bias. © Blackwell Publishing Ltd. 2005.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences > HG Finance > HG4001 Finance management. Business finance. Corporation finance
Depositing User: Ranko Jelic
Date Deposited: 15 Dec 2014 12:28
Last Modified: 15 Dec 2014 12:28
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