Impact of Venture Capital Investment on Firm Performance: An Indian Evidence:
01 Aug 2020-Global Business Review (SAGE PublicationsSage India: New Delhi, India)-Vol. 21, Iss: 4, pp 1011-1024
TL;DR: In this article, the authors evaluate the monitoring and certification hypotheses associated with VC investors involved with Indian listed firms having the potential to influence firm performance, and evaluate their hypotheses in terms of their ability to influence the performance of Indian listed companies.
Abstract: We evaluate the monitoring and certification hypotheses associated with venture capital (VC) investors involved with Indian listed firms having the potential to influence firm performance. Empirica...
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TL;DR: In this paper , the authors analyzed the relationship among venture capital, enterprise performance, and supply chain integration, and the positive impacts of optimization and innovation of supply chain technology and venture capital on enterprise performance improvement are discussed.
Abstract: Aiming at improving the enterprise performance and venture capital management, the edge computing is combined with blockchain technology in the construction of the supply chains so as to improve the stability and security of raw material supply chains of venture capital enterprises. Firstly, the relationships among venture capital, enterprise performance, and supply chain integration are analyzed, and the positive impacts of optimization and innovation of supply chain technology and venture capital on enterprise performance improvement are discussed. Secondly, the edge computing and blockchain technology are adopted to optimize the supply chain, and a protocol model is established to improve the security of supply chain information transmission. In addition, the supply chain Internet of Things (IoT) system is designed in layers based on blockchain and edge computing technology. Finally, the designed protocol model is applied to the supply chain and the supplier performance is evaluated by using the fuzzy analytic hierarchy process (FAHP). The results show that the gas value of the designed protocol model is stable at 104,000∼116,000 in blockchain transactions, and the execution time of a single blockchain transaction fluctuates between 4,300 and 6,100 ms. Therefore, the designed protocol model can effectively ensure the security of supply chain data during the transmission. The evaluation results of supplier performance suggest that the cooperative relationship between venture capital enterprises and suppliers is affected by many factors. Optimizing the supply chain structure and production activities can improve the performance of suppliers and venture capital enterprises. This work provides a reference for analyzing the performance of blockchain technology on venture capital enterprises and suppliers.
13 citations
TL;DR: In this paper, the authors investigated the patterns adopted by VCs in their choice of exit routes The relationship between industry, transaction, and fund level variables with type of exit route chosen was also analyzed.
Abstract: This study investigated the patterns adopted by VCs in their choice of exit routes The relationship between industry, transaction, and fund level variables with type of exit route chosen was also analyzed. Exit patterns were coded based on industry, type of exit and nature of fund. The relationship between industry, transaction, fund level variables and the type of exit route chosen was analyzed based on 221 transactions that occurred in India during the period from 2004 to 2017. High levels of similarity in the exit patterns of the service and manufacturing industries were observed. The myth that IPO from a service industry generates higher value does not seem to hold true. The choice of exit route depends on the type of exit viz. partial/complete exit. The probability of market exit increased by almost 2.8 times when the exit was partial. The fact that there is similarity in exit patterns of both foreign origin and Indian funds is beneficial for entrepreneurs paving way for strategy changes. Secondly the non-differential impact of industry on exit route choice provides further options for both the entrepreneurs and investors.
2 citations
Cites background from "Impact of Venture Capital Investmen..."
...Katti and Raithatha (2018) presented the evidences for value erosion when VCs exhibit the opportunistic behavior of exiting through the easy route of secondary market when the venture is expected to underperform....
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TL;DR: Li et al. as discussed by the authors investigated the impact of VC reputation impact on the pre-IPO performance of the entrepreneurial firms backed by three kinds of VCs and found that entrepreneurial firm performance is significantly associated with industry policy and entrepreneur's performance than VC reputation.
Abstract: This study investigates venture capital (VC) reputation impact on the pre-IPO performance of the entrepreneurial firms backed by three kinds of VCs. This study employs backward stepwise regression models following prior theoretical frameworks to examine the research question. Based on a database of the top 50 VC firms ranked during 2016 to 2020 and their portfolio firms. This study shows some contingent contribution to pre-IPO firm performance. Firstly, the reputation of the Chinese government-owned VCs is negatively associated with their portfolio firm performance. Still, there is a positive relationship between foreign and local private VCs. Secondly, entrepreneurial firm performance is significantly associated with industry policy and entrepreneur’s performance than VC reputation. This study has practical implications for entrepreneurs and limited partners regarding their corporation relationships with the Chinese VCs. JEL codes: G24, G34
1 citations
TL;DR: In this article , the authors employed panel estimated generalized least square (EGLS), fully modified ordinary least squares (FMOLS), and two-step system generalized method of moments (GMM) models to establish the relationship between defined variables.
Abstract: Governance plays a key role in determining industrial investment. In addition, it has a dynamic impact on multiple business decisions. Given that, this study measures the role of country-level governance in protecting industrial investment. Using the 10-year (2007–2016) panel data from 12 Asian economies, we employ panel estimated generalized least square (EGLS), fully modified ordinary least square (FMOLS) and two-step system generalized method of moments (GMM) models to establish the relationship between defined variables. The empirical findings suggest that the countries with good governance situations subsequently enjoy a positive industrial investment. Following investors and property rights protection, a country with a good governance situation may have a voluminous industrial investment stemming from minimum default risk. The empirical findings of the current analysis highlight the significance of a good governance system in boosting industrial investment. A piece of important policy advice for corporate managers is to consider the governance condition while making an industrial investment. In addition, government officials should focus more on shaping better governance to ensure industrial growth. This study provides innovative insights into how country governance shapes corporate investment decisions specifically in Asian economies.
1 citations
TL;DR: In this paper, the authors examined the comparative return performance of private and non-private equity firms in India and found that private equity firms outperformed the benchmark Index return and open-up routes for global and domestic investors for further investment.
Abstract: The present study attempted to examine the comparative return performance of private and non-private equity firms in India. For this purpose, we have used deal-level data retrieved from venture intelligence for the period ranging from 2009 to 2019. To measure the return of private equity, we applied Return multiple, internal rate of return (IRR) and extended internal rate of return (XIRR). We have used the Nifty 50 benchmark index as a proxy for investigating the return generated by public market returns. Study findings revealed that private equity firms outperformed the benchmark Index return and open-up routes for global and domestic investors for further investment. We identified that most private equity deals exited via the M&A route; some also followed the IPO route to exit privately held firms. Results differ from prior studies advocating IPO as the prime mechanism private equity managers use for exiting. Further, returns measured under both routes outperformed the public market index Nifty 50. The study found that 84% (277 Deals) of deals provided a positive cash multiple in the last decade and outperformed the benchmark index. These findings are helpful for private equity firms and fund managers to make investment decisions in the Indian private equity market.
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TL;DR: In this article, the authors explore a model in which the presence of a large minority shareholder provides a partial solution to the free-rider problem in a corporation with many small owners, where the corporation may not pay any one of them to monitor the performance of the management.
Abstract: In a corporation with many small owners, it may not pay any one of them to monitor the performance of the management We explore a model in which the presence of a large minority shareholder provides a partial solution to this free-rider problem The model sheds light on the following questions: Under what circumstances will we observe a tender offer as opposed to a proxy fight or an internal management shake-up? How strong are the forces pushing toward increasing concentration of ownership of a diffusely held firm? Why do corporate and personal investors commonly hold stock in the same firm, despite their disparate tax preferences?
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TL;DR: In this article, the authors examined whether the presence of venture capitalists, as investors in a firm going public, can certify that the offering price of the issue reflects all available and relevant inside information.
Abstract: This paper provides support for the certification role of venture capitalists in initial public offerings. Consistent with the certification hypothesis, a comparison of venture capital backed IPOs with a control sample of nonventure capital backed IPOs from 1983 through 1987 matched as closely as possible by industry and offering size indicates that venture capital backing results in significantly lower initial returns and gross spreads. In effect, the presence of venture capitalists in the issuing firms serves to lower the total costs of going public and to maximize the net proceeds to the offering firm. In addition, we document that venture capitalists retain a significant portion of their holdings in the firm after the IPO. THE ABILITY OF THIRD-PARTY specialists to certify the value of securities issued by relatively unknown firms in capital markets that are characterized by asymmetric information between corporate insiders and public investors has attracted much academic interest in recent years. Several authors, including James (1990), Blackwell, Marr, and Spivey (1990), and Barry, Muscarella, Peavy, and Vetsuypens (1991) have developed and tested models based at least in part on the formal certification hypothesis presented in Booth and Smith (1986). A related body of work, represented by DeAngelo (1981), Beatty and Ritter (1986), Titman and Trueman (1986), Johnson and Miller (1988), Carter (1990), Simon (1990), and Carter and Manaster (1990) has examined how investment bankers and auditors help resolve the asymmetric information inherent in the initial public offering (IPO) process. In this paper we examine whether the presence of venture capitalists, as investors in a firm going public, can certify that the offering price of the issue reflects all available and relevant inside information. We hypothesize that venture capitalists can perform this function; that it will be an economically
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TL;DR: The separation of ownership from control produces a condition where the interests of owner and of ultimate manager may, and often do, diverge, and where many of the checks which formerly operated to limit the use of power disappear.
Abstract: The separation of ownership from control produces a condition where the interests of owner and of ultimate manager may, and often do, diverge, and where many of the checks which formerly operated to limit the use of power disappear.... In creating these new relationships, the quasi-public corporation may fairly be said to work a revolution. It ... has divided ownership into nominal ownership and the power formerly joined to it. Thereby the corporation has changed the nature of profit-seeking enterprise.1
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TL;DR: In this paper, the authors analyzed the performance of the affiliates of diversified Indian business groups relative to unaffiliated firms and found that the most diversified business groups outperform the other firms.
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TL;DR: In this article, the authors developed and tested the hypothesis that young venture capital firms take companies pubic earlier than older VC firms in order to establish a reputation and successfully raise capital for new funds and found that companies backed by young VC firms are younger and more underpriced at their IPO than those of established VC firms.
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