Impact of venture capital & private equity backing, hedge fund managers' ownerships and debt holdings on the post-IPO long-run performance of technological firms

Abstract

The present research aims to analyze if the capital structure by three different stakeholders at the IPO date has an influence on the long-term performance of the issuing companies. These stakeholders are represented by three variables: Venture Capital & Private Equity Ownership, Hedge Fund Managers Ownership and Debt Holdings.

As a result of the application of commonly used models, it appears that statistically abnormal excess returns persist for some portfolios. Technological stocks heavily backed by Venture Capital & Private Equity firms tend to outperform their peers. Besides, companies characterized by low stakes of hedge funds and debt holders in their capital are associated with higher long-term excess returns.

However, even if the determination of the model improves when additional factors are included, these statistically significant abnormal returns vanish.

Regarding the measures of performance for assets and equity efficiencies, no correlation is found for the capital structure under each criterion since the model is not rightly calibrated due to a disparity in data.

For further research, it would be advised to use a complete database which includes enough information about the IPO market. With additional data, researches on highly specific capital structure combined with different criteria of ownership could be performed. A value-weighted approach and quartile-based slicing for portfolios construction could also bring interesting comparisons with the present equally-weight approach.