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Venture capitalist quality and IPO certification

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  • Steven D. Dolvin
  • Mark K. Pyles

Abstract

The opportunity cost of going public is directly related to the level of information asymmetry associated with the issuing firm. Independent third parties, such as underwriters and venture capitalists, are believed to mitigate this asymmetry through certification, thereby reducing this cost. Existing studies illustrate that higher quality underwriters provide increased certification value; however, current research is essentially mute with regard to the effect of venture capitalist quality. We fill this gap, finding that higher quality venture capitalists also provide incremental certification value relative to those of lower quality. Additionally, we suggest that the most appropriate measure of venture capitalist quality is a simple binary variable that captures prior experience as the lead of an IPO venture capital syndicate.

Suggested Citation

  • Steven D. Dolvin & Mark K. Pyles, 2006. "Venture capitalist quality and IPO certification," Venture Capital, Taylor & Francis Journals, vol. 8(4), pages 353-371, April.
    • Handle: RePEc:taf:veecee:v:8:y:2006:i:4:p:353-371
    DOI: 10.1080/13691060600759782
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    References listed on IDEAS

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    Cited by:

    1. Markus Fitza & Thomas J. Dean, 2016. "How much do VCS and underwriters matter? A comparative investigation of venture capitalist and underwriter effects on IPO underpricing," Venture Capital, Taylor & Francis Journals, vol. 18(2), pages 95-114, April.
    2. Jeppsson, Hans, 2018. "Initial public offerings, subscription precommitments and venture capital participation," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 650-668.
    3. Chien-Sheng Richard Chan & Haemin Dennis Park & Pankaj Patel, 2018. "The effect of company name fluency on venture investment decisions and IPO underpricing," Venture Capital, Taylor & Francis Journals, vol. 20(1), pages 1-26, January.
    4. Steven D. Dolvin & Stephanie A. Fernhaber, 2014. "Seasonal Affective Disorder and IPO underpricing: implications for young firms," Venture Capital, Taylor & Francis Journals, vol. 16(1), pages 51-68, January.
    5. David Citron & Robert Cressy & Xavier Gerard, 2008. "Prospectus forecast publication and forecast errors: the role of venture capitalist certification," Venture Capital, Taylor & Francis Journals, vol. 11(2), pages 87-105, August.

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