Prof. Jie Ying (Southern Illinois University)
Date: Tuesday, July 5th, 2022
Time: 12:00pm - 03:00pm
Location: Room 314, Schackstr. 4, 3rd level
Title:The Rise of Venture Capital and IPO Quality
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 VC funding flows disproportionately to the most promising mature start-ups causing them to hold back from public issuance. Consistent with this explanation, the decline in IPO quality is driven by late-stage VC investment and is stronger when the venture capitalists are more experienced. 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.