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Venture Capital and Its Impact on an Early IPO in the Venture-Backed Companies

벤처캐피탈의 투자가 투자기업 조기 IPO에 미치는 영향

  • 이희우 (호서대학교 벤처전문대학원) ;
  • 정희석 (성결대학교 경영학부)
  • Received : 2012.09.12
  • Accepted : 2012.10.29
  • Published : 2012.11.30

Abstract

We made a regression analysis on the early IPO of venture capital investments in Korean IPO market. First, we found that it was likely to shorten the period to IPO in companies which were fast growing with a good operating cash flow, but these companies had a higher possibility of the earning management. Second, companies with more assets and larger size of the board of directors did not take companies public any earlier. Third, a better corporate governance also had no impact on the time period to IPO in the newly public firms. The findings above clearly show that venture-backed companies in Korea pursue the tendency of an early IPO. This phenomenon was much clearer when the companies were invested in by multiple venture capital firms than by a single investor. In general, venture capital firms invest in companies which are fast growing and which have a good operating cash flow. On the other side, venture capitals make investee companies go public earlier by manipulating operating earnings, so that they themselves may exit early. In conclusion, this research has shown that venture capitals in Korea do not play a positive role in the corporate transparency. This is the paradox of venture capital investment and this also shows the current status of Korean venture capital firms.

Keywords

Venture Capital;Grandstanding;KOSDAQ;Corporate Transparency;Earning Management