The Rise of Venture Capital and IPO Quality

Amrita Nain; Jie Ying; Joseph Arthur

doi:10.2139/ssrn.4560514

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The Rise of Venture Capital and IPO Quality

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The Rise of Venture Capital and IPO Quality

Amrita Nain, Jie Ying and Joseph Arthur

SSRN Electronic Journal

2023

DOI: 10.2139/ssrn.4560514

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Preprint (Author's original)This preprint has not been evaluated by subject experts through peer review. Preprints may undergo extensive changes and/or become peer-reviewed journal articles. Open Access

Abstract

We show that an increase in the supply of venture capital (VC) leads to a decline in the quality of firms going public. We argue that due to VC selectivity, private capital flows disproportionately to the most promising mature start-ups causing them to hold back from public issuance. Post-IPO abnormal returns indicate that the stock market does not fully incorporate this decline in quality at the time of the IPO. Our research adds to recent evidence on the negative impact of fast-growing private markets on Main Street investors.

Details

Title: Subtitle: The Rise of Venture Capital and IPO Quality
Creators: Amrita Nain - University of Iowa
Jie Ying - Southern Illinois University Edwardsville
Joseph Arthur - University of Iowa
Resource Type: Preprint
Publication Details: SSRN Electronic Journal
DOI: 10.2139/ssrn.4560514
ISSN: 1556-5068
eISSN: 1556-5068
Language: English
Date posted: 2023
Academic Unit: Finance
Record Identifier: 9984472620202771

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