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The effects of venture capital syndicate diversity on earnings management and performance of IPOs in the US and UK: An institutional perspective

Chahine, Salim and Arthurs, Johnathan D. and Filatotchev, Igor and Hoskisson, Robert E. (2012) The effects of venture capital syndicate diversity on earnings management and performance of IPOs in the US and UK: An institutional perspective. Journal of Corporate Finance, 18 (1). pp. 179-192. ISSN 0929-1199

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Abstract

This study examines the extent to which principal-principal agency conflicts within venture capital (VC) syndicates lead to additional principal-agent conflicts in IPO firms in two institutional contexts. Using a matched sample of 274 VC-backed IPOs in the US and the UK, it shows that the diversity of a VC syndicate increases pre-IPO discretionary current accruals, used as a proxy for earnings management, but the impact of such diversity is higher in the US. There is also evidence of higher underpricing and lower aftermarket performance in firms with higher earnings management and VC diversity, and these negative performance effects are also higher in the US. Our findings indicate that local and informal institutions have a significant effect on multiple agency conflicts in IPO firms and performance outcomes.

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website. Access to the published version may require a subscription. The definitive version is available at www.elsevier.com.
Keywords: earnings management / initial public offerings / venture capital / conflicts of interest / institutions
Classification Codes: JEL G14, G32, M41
Divisions: Departments > Welthandel > International Business
Version of the Document: Submitted
Variance from Published Version: Minor
Depositing User: Dissertation Administrator
Date Deposited: 29 Mar 2012 14:07
Last Modified: 11 Jul 2017 19:32
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/58188/
URI: http://epub.wu.ac.at/id/eprint/3486

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