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Shareholders' rights and the effect of the origin of venture capital firms on the underpricing of US IPOs

Show simple item record Chahine S. Saade S.
dc.contributor.editor 2011 2017-09-07T07:51:24Z 2017-09-07T07:51:24Z 2011
dc.identifier 10.1111/j.1467-8683.2011.00857.x
dc.identifier.issn 09648410
dc.description.abstract Manuscript Type: Empirical Research Question-Issue: This paper examines whether firm performance at initial public offerings (IPO) is differentially affected by the origin of Venture Capital (VC) firms. Empirical investigations consider both the anti-director index and the anti-self dealing index of the country of origin of a specific VC firm as indicators for its level of legal protection of shareholders' rights. Research Findings-Insights: We find that underpricing of US IPOs is negatively related to the rating of the legal protection rights of VC firms within the VC syndicate of an IPO firm, and the effect is more significant in the subsample of IPOs involving foreign VC firms. There is also evidence of a complementary role played by the legal protection rights of foreign VCs and board independence of IPO firms in reducing underpricing. Further robustness tests confirm empirical findings controlling for the selection bias of IPO firms by foreign VCs, and using the effect of the protection rights of the country of origin of the lead, largest, board member, or oldest, i.e., most experienced, VC firm. There is also evidence of a positive but marginally significant effect of the legal protection rights of VC firms on the long-term performance of their portfolio companies. Theoretical-Academic Implications: Our paper suggests that the institutional framework and national legal differences should matter in considering the effect of VC firms on IPO performance. We find strong support for the institutional perspective whereby institutional predictions were largely supported. Our results also expand on prior research on VC syndication and show that in addition to VC monitoring, the shareholders' protection rights of the country of origin of foreign VC syndicate members would signal the quality of portfolio companies at IPO. Moreover, the complementary role between the legal protection rights of the country of origin of foreign VCs and board independence indicates that firm performance is the outcome of complex mechanisms involving both firm and country-level settings. Practitioner-Policy Implications: Evidence on the association between IPO performance and the origin of VC firms suggests that policy-makers and practitioners should view legal protection of shareholders' rights as a global issue. Since VC investments are valuable for the development of small and medium-size enterprises, our results should contribute to our understanding of cross-border partnering and the quality of partners within the VC industry. © 2011 Blackwell Publishing Ltd.
dc.format.extent Pages: (601-621)
dc.language English
dc.publisher HOBOKEN
dc.relation.ispartof Publication Name: Corporate Governance; Publication Year: 2011; Volume: 19; no. 6; Pages: (601-621);
dc.source Scopus
dc.title Shareholders' rights and the effect of the origin of venture capital firms on the underpricing of US IPOs
dc.type Article
dc.contributor.affiliation Chahine, S., Olayan School of Business, American University of Beirut, Lebanon
dc.contributor.affiliation Saade, S., Olayan School of Business, American University of Beirut, Lebanon
dc.contributor.authorAddress Chahine, S.; The Olayan School of Business, American University of Beirut, Bliss Street, P.O.Box: 11-0236, Beirut, Lebanon; email:
dc.contributor.authorCorporate University: American University of Beirut; Faculty: Suliman S. Olayan School of Business; Department: School of Business;
dc.contributor.authorDepartment School of Business
dc.contributor.faculty Suliman S. Olayan School of Business
dc.contributor.authorInitials Chahine, S
dc.contributor.authorInitials Saade, S
dc.contributor.authorReprintAddress Chahine, S (reprint author), Amer Univ Beirut, Olayan Sch Business, Bliss St,POB 11-0236, Beirut, Lebanon.
dc.contributor.authorUniversity American University of Beirut
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dc.description.citedCount 5
dc.description.citedTotWOSCount 4
dc.description.citedWOSCount 4
dc.format.extentCount 21
dc.identifier.scopusID 80054901221
dc.publisher.address 111 RIVER ST, HOBOKEN 07030-5774, NJ USA
dc.relation.ispartOfISOAbbr Corp. Gov.
dc.relation.ispartOfIssue 6
dc.relation.ispartofPubTitle Corporate Governance
dc.relation.ispartofPubTitleAbbr Corp. Gov.
dc.relation.ispartOfVolume 19
dc.source.ID WOS:000296490200007
dc.type.publication Journal
dc.subject.otherAuthKeyword Corporate governance
dc.subject.otherAuthKeyword Initial public offerings
dc.subject.otherAuthKeyword Institutional theory
dc.subject.otherAuthKeyword Legal protection rights
dc.subject.otherAuthKeyword Underpricing
dc.subject.otherAuthKeyword Venture capital
dc.subject.otherKeywordPlus INITIAL PUBLIC OFFERINGS
dc.subject.otherKeywordPlus CORPORATE GOVERNANCE
dc.subject.otherKeywordPlus INVESTOR PROTECTION
dc.subject.otherKeywordPlus EMERGING ECONOMIES
dc.subject.otherKeywordPlus COMMERCIAL-BANKS
dc.subject.otherKeywordPlus BUSINESS GROUPS
dc.subject.otherKeywordPlus PRIVATE EQUITY
dc.subject.otherKeywordPlus PERFORMANCE
dc.subject.otherKeywordPlus OWNERSHIP
dc.subject.otherKeywordPlus CONTRACTS
dc.subject.otherWOS Business
dc.subject.otherWOS Business, Finance
dc.subject.otherWOS Management

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