Abstract
This paper examines whether merger and acquisition (M&A) exits have the same effect on venture capital (VC) reputation than initial public offering (IPO) exits? Using a large sample of U.S. IPOs and M&As for the period 1996–2015, we find that M&A exit strategy has the same importance as IPO exit strategy in explaining the incentives of young venture capital firms to grandstand. There is, however, no evidence that young VC firms exit from their portfolio companies closer to the next follow-on fund than older VCs. In addition, our results show that to build their reputation, young VC firms are willing to accept a lower premium in the case of M&A exits and to bear the cost of higher underpricing in the case of IPO exits. We also find that the presence of reputed VC affects significantly the probability of an IPO exit over an acquisition exit.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
