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The Journal of Private Equity

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Article

Financial Value Creation: A Comparative Study of VC-Backed IPOs and Non-VC-Backed IPOs in India

M.B. Raghupathy and A. Thillairajan
The Journal of Private Equity Summer 2015, 18 (3) 55-71; DOI: https://doi.org/10.3905/jpe.2015.18.3.055
M.B. Raghupathy
is an assistant professor of finance at Shiv Nadar University School of Management and Entrepreneurship in Uttar Pradesh, India.
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  • For correspondence: mb.ragupathy@snu.edu.in
A. Thillairajan
is a professor of finance at the Indian Institute of Technology Madras in Chennai, India.
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  • For correspondence: thillair@iitm.ac.in
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Abstract

As financial investors in portfolio companies, venture capital (VC) firms are expected to add value through continuous monitoring and sustained involvement. Such an effort is expected to give VC-backed IPO firms (VC IPOs) an edge over those IPO firms not backed by VCs. We examine such value additions use a comparative analysis of operating and stock performance data of VC IPOs against three groups of non-VC POs. We identified a set of 92 VC IPOs and 182 non VC IPOs. The 182 non-VC IPOs were further subdivided into industry and size groups. While Wilcoxon tests were used to compare the medians of operating and stock performance, panel data regression models were used to establish the impact of VC on those differential performances. We find that the medians of VC IPOs on most operating performance parameters are better than non-VC IPO groups. But the relational tests could not attribute the better performance to VC influence. We conclude that this could be indicative of VCs’ superior ability to identify promising ventures and push them toward their maximum potential. This study is one of the pioneering efforts in exploring VC value creation in the Indian context. We also extend the capital market research in accounting to a VC context.

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The Journal of Private Equity: 18 (3)
The Journal of Private Equity
Vol. 18, Issue 3
Summer 2015
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Financial Value Creation: A Comparative Study of VC-Backed IPOs and Non-VC-Backed IPOs in India
M.B. Raghupathy, A. Thillairajan
The Journal of Private Equity May 2015, 18 (3) 55-71; DOI: 10.3905/jpe.2015.18.3.055

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Financial Value Creation: A Comparative Study of VC-Backed IPOs and Non-VC-Backed IPOs in India
M.B. Raghupathy, A. Thillairajan
The Journal of Private Equity May 2015, 18 (3) 55-71; DOI: 10.3905/jpe.2015.18.3.055
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  • Article
    • Abstract
    • THEORETICAL BACKGROUND
    • DATA AND METHODOLOGY
    • ANALYSIS OF OPERATING PERFORMANCE
    • ANALYSIS OF ISSUE CHARACTERISTICS
    • PANEL ANALYSIS ON NIFTY-ADJUSTED BUY-AND-HOLD RETURN
    • DISCUSSION AND CONCLUSION
    • ENDNOTES
    • REFERENCES
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  • Editor’s Letter
  • Editor’s Letter
  • Profitability Analysis of Select Private Equity Funds in India
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