Long-term Performance of New Equity Issuers, Venture Capital and Reputation of Investment Bankers

Doukas J. A., Gonenc H.

ECONOMIC NOTES, vol.34, no.1, pp.1-34, 2005 (ESCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 34 Issue: 1
  • Publication Date: 2005
  • Doi Number: 10.1111/j.0391-5026.2005.00142.x
  • Journal Name: ECONOMIC NOTES
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Scopus
  • Page Numbers: pp.1-34
  • Hacettepe University Affiliated: Yes


This study investigates the potential effects of investment-banking reputation and venture capital on the long-term performance of initial public offerings (IPOs) simultaneously. Our findings do not support the view that IPOs perform differently compared with other firms, with the only exception of venture-backed IPOs. We show that venture-backed IPOs are associated with long-term gains when we account for investment bankers' reputation, size and book-to-market effects. Zero investment portfolios, based on combinations of underwriter's reputation and venture capital involvement's in IPOs, provide additional evidence in support of the view that venture-backed IPOs, regardless of the reputation of underwriters, are associated with significant post-issue gains. Our results also indicate that the reputation of investment bankers matters only in the absence of venture capital.