Venture capital firm reputation, portfolio company long-run performance, hot IPO markets, and different countries - evidence from continental Europe’s market for initial public offerings

Abstract

Using a sample of 442 initial public offerings, I study the relation of venture capital firm reputation and portfolio company long-run post- initial public offering performance in continental Europe between 2004 and 2016. Inconsistent with Krishnan et al. (2011), I find venture capital reputation, based on past IPO activity of venture capitalists, to have a significant negative relation on issuer long-run performance in Europe. My findings also indicate that venture capital reputation only affects portfolio companies long-run returns negatively in normal markets and is insignificant during hot IPO markets. Also, reputable venture capitalists’ portfolio firm long-run performance is not consistent between my sample countries, but rather reputable venture capitalists’ portfolio companies outperform their constituents in countries with small venture capital markets.