How Do Corporate Venture Capitalists Create Value for ...

How Do Corporate Venture Capitalists 

Create Value for Entrepreneurial Firms? 

by 

Thomas J. Chemmanur * 

and 

Elena Loutskina ** 

Current Version: June, 2008 

* Associate Professor of Finance, Carroll School of Management, Boston College, 440 Fulton Hall, Chestnut Hill, MA 02467, 

Tel: (617)552-3980, fax: (617) 552-0431, e-mail: chemmanu@bc.edu. 

** Assistant Professor of Finance, Darden Graduate School of Business Administration, University of Virginia, Charlottesville 

VA 22903, Tel: (434) 243-4031, e-mail: eloutskina@virginia.edu.



ABSTRACT 

We analyze how corporate venture capitalists (CVCs) create value for entrepreneurial firms backed 

by them and how value creation by CVCs differs from that of independent venture capitalists (IVCs). 

Making use of a large data set consisting of a sample of CVC-backed and IVC-backed firms (starting 

from their first round of investment in an entrepreneurial firm and going well into the post-IPO market), 

we explore three related research questions: First, do CVCs exploit their knowledge and industry 

expertise when choosing portfolio firms, and invest in significantly different kinds of firms compared to 

independent venture capitalists (IVCs)? Second, do they succeed in creating greater product market value 

subsequent to investment compared to IVCs? Finally, do they allow portfolio firms to access the equity 

markets more efficiently? Our empirical findings indicate that there are two ways in which CVCs 

uniquely create value for entrepreneurial firms. First, CVC create value by investing significant amounts 

in younger and riskier firms involving pioneering technologies: since many such firms would not have 

received private equity financing from IVCs, these firms may not have been able to grow and mature 

without CVC funding. Second, CVCs seem to play an important role in signaling the true value of firms 

backed by them to three different constituencies: first, to IVCs, prompting them to co-invest in these firms 

pre-IPO; second, to various financial market players such as underwriters, institutional investors, and 

analysts, allowing them to access the equity market at an earlier stage in their life-cycle compared to firms 

backed by IVCs alone; and third, directly to IPO market investors, allowing CVC-backed firms to obtain 

higher IPO market valuations compared to the valuation of firms backed by IVCs alone.

1. Introduction 



US corporations started to establish internal venture capital funds (often referred to as corporate 

venture capital) back in the 1960s. Over the years, corporate venture capital investments accounted for 

around 7% of venture capital industry reaching 10% in recent years. In the year 2000, corporations 

invested in almost 1900 entrepreneurial companies with a total dollar investment of around $16 billion. 

Corporate venture capitalists (CVCs) present an interesting case study, since, even though they share a 

number of features with independent venture capital firms (IVCs), they are significantly different from 

IVCs in many ways, some of which are as follows. First, CVCs are structured as subsidiaries of 

corporations and can only have one (corporate) investor as opposed to IVCs, who are traditionally 

structured as limited partnerships where general partners invest in entrepreneurial firms on behalf of 

limited partners who provide the funds for investment. Second, the performance-based compensation 

structure enjoyed by IVC managers is normally not found in CVC funds, where managers are mostly 

compensated by fixed salary and corporate bonuses, so that corporate venture capitalists may be less 

concerned than IVCs with the immediate financial returns from their entrepreneurial firms. Third, the 

presence of a corporate parent may provide CVCs with a unique knowledge of the industry and the 

technology utilized by the entrepreneurial firm. 1 

The venture capital literature has argued that venture capitalists, in general, create value for the 

entrepreneurial firms they invest in several ways. For example, Hellman and Puri (2000, 2002)) has 

documented that IVCs are able to create product market value for entrepreneurial firms, by 

“professionalizing” firm management and helping them develop contracts with suppliers and customers. 2 

At the same time, a number of papers in the venture capital and IPO literature have argued that the pricing 

1 

See Gompers and Lerner (2000) for a detailed discussion of the differences in governance and compensation structures between 

CVCs and IVCs. 

2 

The assumption that venture capitalists can help entrepreneurial firms perform better in the product market has also become 

standard in the theoretical literature on venture capital: see, e.g., Repullo and Suarez (2001) or Chemmanur and Chen (2003)). 

1

of IPO shares in venture backed firms is significantly different from that in non-venture backed firms, 

either in terms of the extent of underpricing (see, e.g., Megginson and Weiss (1991); Barry, Muscarella, 

Peavy and Vetsuypens (1990); or Lee and Wahal (2000)) or in terms of share valuation with respect to 

intrinsic value (Chemmanur and Loutskina (2003)). Further, venture backing also seems to affect the age 

at which firms are able to go public (see, e.g., Loughran and Ritter (2004)). In other words, venture 

backing seems to affect the ease of entrepreneurial firms to access the capital markets, and terms under 

which they are able to access these markets. A natural question that arises here is how the significant 

governance and other differences between the two kinds of venture capitalists affect result in differences 

in value creation by CVCs and IVCs for the entrepreneurial firms backed by them. The objective of this 

paper is to answer this question by empirically analyzing differences in value creation by corporate 

venture and independent venture capitalists, and thereby to develop a better understanding of the unique 

ways in which CVCs are able to create value for entrepreneurial firms backed by them. 

We hypothesize that CVCs may differ from IVCs in creating value for portfolio firms in three 

important ways. First, CVCs may invest in different kinds of firms compared to IVCs, and may provide 

funding to firms at different stages in their life cycle. The terms under which they provide funding may 

differ across CVCs and IVCs. These differences may arise from the differences in institutional structure 

and the objectives of these two kinds of intermediaries: while IVCs are primarily concerned with the 

financial returns from their portfolio firms, CVCs may also be concerned with other benefits to the 

corporate parent that may arise from the investment, such as exposure to a pioneering technology and 

early establishment of alliances in the product market. Further, the industry and technology expertise of 

CVCs may allow them to screen firms better, which may allow them to invest larger amounts in riskier 

and more R&D intensive firms (with longer time to achieving profitability) compared to IVC 

investments. Finally, there may be differences in bargaining power between CVCs and IVCs, so that the 

terms of financing of entrepreneurial firms may differ across these two intermediaries. 

Second, CVCs and IVCs may differ in their ability to create product market value for entrepreneurial 

firms subsequent to investment. The empirical literature (e.g., Hellman and Puri (2000, 2002)) has 

2

documented that IVCs are able to create value for entrepreneurial firms, for example, by 

“professionalizing” firms management. On the one hand, specialization by IVCs in making investments in 

certain industries may help them develop contracts superior to that of CVCs in the product market (e.g., 

with suppliers and intermediaries) which may be beneficial to entrepreneurial firms backed by them. On 

the other hand, the effect of the superior industry expertise of CVC -parent may outweigh the effect of 

such industry contacts, allowing CVCs to create greater product market value for entrepreneurial firms 

backed by them. Such differences in value creation may potentially be reflected in differences in post-IPO 

operating performance for CVC and IVC backed firms. 

Third, CVCs and IVCs may have different abilities to help portfolio firms access the capital markets, 

and the terms under which they access these markets. One the one hand, IVCs, being more frequent 

players in the IPO market, can be expected to have stronger relationships with top-tier investment banks, 

institutional investors, and financial analysts which may allow them to better communicate firm value to 

the capital market. On the other hand, backing by a corporate parent may convey a credible signal to the 

financial market about the future prospects of the entrepreneurial firm. Such differences between CVCs 

and IVCs may translate into different probabilities of a successful exit for CVC and IVC backed firms, 

and to different proportions of these kinds of exits. These differences may also result in systematic 

differences in the IPO market valuation between CVC-backed and IVC-backed firms. 3 

In this paper, we make use of data regarding a large sample of CVC and IVC backed firms to 

identify some of the aspects of value creation for entrepreneurial firms by corporate venture capitalists 

discussed above. Our dataset consists of round by round financing data starting with the very first 

investment made by venture capitalists in a private firm, extending through the firm’s IPO stage, and 

ending with post-IPO operating performance and financial market data for five years subsequent to the 

IPO. Our data set contains not only the characteristics of entrepreneurial firms, but also various aspects of 

the CVCs and IVCs investing in those firms. 

3 Of course, these differences in exit probabilities and market valuations may also reflect differences in the kinds of firms 

invested in by CVCs and IVCs, and differences in the product market value created by these two kinds of intermediaries. 

3

Our empirical analysis consists of six parts. First, we study various characteristics of CVC backed 

firms and compare them with those of IVC backed firms. Second, we study the probability of a successful 

exit (IPO or acquisition) for CVC backed firms, and compare this to that of IVC backed firms. Third, we 

study the five year post-IPO operating performance of CVC backed firms, and compare this to that of 

IVC backed firms. Fourth, we compare the quality and the extent of participation by financial market 

players such as underwriters, institutional investors, and coverage by analysts in the IPOs of CVC and 

IVC backed firms. Fifth, we compare equity valuation in the IPOs of CVC backed and IVC backed firms. 

Finally, we compare the long-term post-IPO stock returns of CVC backed and IVC backed firms. 

Our paper provides a number of new results on the sources of value creation by CVCs. Our results 

can be summarized as follows. First, we document (for the first time in the literature) that the investment 

patterns of CVC are significantly different from that of IVCs. CVCs tend to invest into younger and 

riskier firms and in earlier rounds compared to IVCs. These firms tend to be in less mature industries 

which require significantly larger R&D and capital expenditures, and which are more competitive (have 

no dominant firm in product market). Further, CVCs are more likely to select portfolio companies in 

industries closely related to that of their corporate parent. Finally, CVCs invest significantly large 

amounts of money per round than IVCs (even compared to IVC investments in the same firm) and at 

higher valuation than IVCs (i.e., the fraction of stock ownership given to CVCs in exchange for each $1 

million invested is lower). 

Second, we find that the probability of a successful exit (IPO or acquisition) is higher in CVC 

backed firms compared to IVC backed firms. Further, the probability of having an IPO rather than 

acquisition is greater for a CVC backed firm. However, we find that the time from first venture capital 

investment to exit is greater for CVC backed firms, consistent with our earlier findings that CVCs invest 

in younger firms, in less mature industries and in earlier rounds (which may take longer time to reach 

profitability). 

Third, we document (for the first time in the literature) that CVC-backed firms underperform IVC- 

backed firms in terms of operating performance for the first five years after the IPO. Even after we 

4

control for firm industry, size, and year of the issue, CVC backed IPOs underperform IVC backed IPOs 

by 23.2% in terms of profit margin and 26.9% in terms of sales margin. Consistent with this, we find that 

CVC-backed firms have a greater probability of being delisted (due to liquidation) in the years 

immediately after IPO. However, the extent of underperformance of CVC-backed firms declines with the 

number of years after IPO: while the average underperformance in the first year post IPO is 23.2 % in 

terms of profit margin and 26.9% in terms of sales margin, this underperformance declines to 2.7% and 

0.4% respectively in the fifth year post-IPO. Further, the post IPO sales growth of CVC backed firms is 

higher than IVC backed firms: this difference in sales growth is highest in the first year post-IPO (35,5% 

on average) and becomes smaller with the number of years after IPO (this difference is only 7.7% in the 

fifth year post IPO). Finally, we find that CVC backed firms have significantly higher R&D and capital 

expenditures than IVC backed firms, consistent with our earlier evidence that CVCs invest in firms in 

more R&D and capital intense industries. Overall, our results suggest that CVCs are able to take younger 

firms that are further away from profitability public, and that these CVC backed IPO firms have greater 

growth options than firms taken public by IVCs. 

Fourth, we compare the extent and quality of participation by various market players in the IPO of 

CVC and IVC backed firms. In particular, we compare the reputation of the underwriters involved; the 

number of institutional investors participating in IPO and institutional investor holding as a fraction of 

IPO shares sold; extent of analysts coverage immediately post-IPO; and the reputation of IVCs 

participating in CVC and IVC backed IPOs. Contradictory to what one might expect from the fact that 

IVCs are more frequent players in the IPO market compared to CVCs, we find that the extent and quality 

of participation by various market players is higher for CVC-backed IPOs than for IVC backed IPOs: 

thus, underwriter reputation, participation by institutional investors, and analyst coverage are higher for 

CVC-backed IPOs compared to IVC-backed IPOs. Even more surprisingly, the reputation of IVCs co- 

investing with CVCs in CVC-backed IPO firms is similar (i.e., not lower than) the reputation of IVCs 

investing in IPO firms backed by IVCs alone. However, our regression analysis indicates that, even after 

controlling for the presence of reputable IVCs co0investing in CVC-backed IPOs, these IPOs are 

5

characterized by higher reputation underwriters, greater analyst coverage, and large post-IPO institutional 

investor holdings. The fact that despite brining younger firms further away from profitability (on average) 

to the IPO market, CVCs are able to attract greater participation by more reputable market players 

indicates a signaling role for CVC-backing in IPOs: i.e., backing by CVCs with superior industry 

knowledge seems to effectively communicate that IPO firm has good future prospects to various market 

players. 4 

Fifth, we compare IPO and secondary market (at first trading day closing price) valuations of CVC 

and IVC backed IPOs. We find that various price to value multiples (where value is computed using 

comparable firm multiples or using discounted cash flow models using realized earnings) are higher for 

CVC backed IPO firms than for IVC backed IPO firms (regardless of whether they are computed using 

the IPO price of the secondary market first day closing price). Our multivariate analysis indicates that the 

increased presence of various high quality market players such as high reputation underwriters, greater 

institutional holdings, and greater analyst coverage results in higher equity market valuations of IPO 

firms. However, the higher IPO and secondary market valuation associated with CVC backed firms 

persist even after controlling for the presence of various high quality market players, indicating that in 

addition to attracting higher quality market players to the IPOs of firms backed by them, CVC-backing 

also has a direct role in signaling firm value to the equity market. 

Finally, our comparison of the long-term post-IPO stock returns of CVC and IVC backed firms 

indicated that CVC-backed firms outperform IVC-backed firms over the five year period after the IPO. 

The fact that CVC-backed IPOs do not underperform IVC-backed IPOs in terms of long-run stock return 

indicates that the higher valuation we documented earlier for CVC-backed firms is not the result of a 

temporary overvaluation of these firms at the time of IPO: one should expect such a temporary 

overvaluation to be corrected over a five year period, yielding long run stock return underperformance for 

CVC backed firms relative to IVC backed firms. 

4 See, e.g., Leland and Pyle (1977) for a signaling model where the extent of ownership by firm insiders with private information 

conveys the true value of a firm to outside investors in the equity market. 

6

Overall, our empirical findings indicate that there are two ways in which CVCs uniquely create value 

for entrepreneurial firms. First, CVC create product market value by investing significant amounts in 

younger and riskier firms involving pioneering technologies: since many such firms would not have 

received private equity financing from IVCs, these firms may not have been able to grow and mature 

without CVC funding. Second, CVCs seem to play an important role in signaling the true value of firms 

backed by them to three different constituencies: first, to IVCs, prompting them to co-invest in these firms 

pre-IPO; second, to various financial market players such as underwriters, institutional investors, and 

analysts, allowing them to access the equity market at an earlier stage in their life-cycle compared to firms 

backed by IVCs alone; and third, directly to IPO market investors, allowing CVC-backed firms to obtain 

higher market valuation for these IPOs (in combination with the increased participation by various 

reputable market players) compared to the valuation of firms backed by IVCs alone. In summary, we find 

that CVCs create significant value for entrepreneurial firms and their shareholders in the above two ways. 

The rest of the paper is organized as follows. Section 2 discusses the related literature. Section 3 

discusses the data and sample selection. Sections 4 though 8 present our empirical tests and results. We 

conclude the paper and discuss the results in Section 9. 

2. Related Literature 

The empirical literature on corporate venture capital is relatively small. 5 An important paper in this 

literature is Gompers and Lerner (2000), who study how the organizational and compensation structure in 

CVC-backed firms affect their performance. 6 They find that CVC-backed firms are more likely to go 

public compared to IVC backed firms. Further, they find that this result is particularly strong if there is a 

strategic fit between a CVC-parent and the entrepreneurial firm backed by it. Coles, Hertzel, and 

Santhanakrishnan (2002) also study the impact of complementarities on the likelihood of a successful exit 

5 See Hellman (2002) for a theoretical model of corporate venture investing. His model predicts that CVCs will invest in and 

provide product market support for start-up with greater strategic fit with the CVC’s corporate parent. 

6 See also Gompers (2002), who explores a detailed history of corporate venture investments over the part twenty years. He 

documents that corporate venture capital investments tend to have higher success rates (in terms going public) than the 

investments on independent venture capital firms. 

7

for CVC-backed firms. He find that CVC backed firms having a strategic fit with the CVC parent are 

more likely to receive product market support from the CVC-parent, which, in turn, increases the 

likelihood of a successful exit. While our finding that CVC backed firms have a higher probability of a 

successful exit compared to IVC backed firms is consistent with that of the above two papers, this paper 

focus on the product market fit as the only reason for this higher success probability. In contrast, our 

results suggest that the ability to attract greater participation from reputable players may also contribute to 

the higher probability of a successful exit of CVC-backed firms. 

There has been no literature so far comparing the participation of various market players in IPOs of 

CVC and IVC backed firms. There is also been no literature studying the post-IPO operating performance 

of CVC backed firms, nor is there any literature on the post-IPO stock returns of the CVC backed firms. 

In other words, ours is the first paper to compare the post-IPO operating performance, extent of 

participation by reputable financial market players, and post-IPO stock returns of CVC and IVC backed 

firms. 7 Ours is also the first paper to systematically study the firm, industry, and other characteristics that 

prompt CVC to choose a particular firm to invest in. 8 

3. Data and Sample Selection 

3.1 Who Are Corporate Venture Capitalists? 

Corporate venture capitalists are stand-along subsidiaries of non-financial corporations who invest in 

new ventures on behalf of their corporate parent. To identify these investors we start with the list of 

venture capitalists who enjoy investments from corporations provided by SDC Platinum Venture Expert. 

Among all venture capital firms, SDC identifies 1846 suspects for being a corporate VC. Using various 

sources of information (Factivia, Google, LEXUS/NEXUS, etc.) we then identify (by hand) those with a 

unique corporate parent. The original list of 1846 VCs produces: (i) 456 firms that cannot be considered 

7 

Similar to our paper, Maula and Murray (2000) and Ivanov (2003) also compare the IPO market valuations of CVC-backed and 

IVC-backed firms and find that CVC-backed firms are characterized by higher IPO valuations. 

8 

However, Gompers (2002) documents, consistent with our results, that a majority of CVC investments go to firms making use 

of technologies related to the CVC-parent. 

8

a CVC since they represent financial companies, partnerships, or funds with multiple corporate parents; 

(ii) 466 VC firms have foreign or unknown parent. 9 This leaves us with 926 distinct corporate venture 

capital firms out of which 562 are publicly traded companies. An entrepreneurial firm is considered to be 

backed by a CVC if it has at least one CVC investor. Furthermore, to evaluate the degree of participation 

in a company by a CVC we compute the share of CVC dollar amount invested in the total amount 

obtained by an entrepreneurial firm over all VC investment rounds. Using this measure we separate the 

set of CVC backed firms into those with a share of CVC investment above 20% (high-CVC-investment, 

HCVC) and those with a share of CVC investment below 15% (low-CVC-investment, LCVC). 

Finally, for each corporate venture firm we find the characteristics of the corporate parent such us 

industry, size, etc. Specifically we match the sample of CVCs to the Compustat database to identify 

publicly traded corporate parents and to the D&B database to identify private corporate parents. This 

matching allows us to identify the primary SIC code for the CVC corporate parent. 10 We use these SIC 

codes to evaluate the industry match between corporate parent and entrepreneurial firms. Specifically, for 

each entrepreneurial firm we construct four industry match indices that are equal to the number of CVCs 

backing this firm that are in the same industry as measured by 2 digit SIC code, 3 digit SIC code, 4 digit 

SIC code, and Fama-French industry classification code, respectively. 

3.2 Reputation of Independent Venture Capitalists 

In this study we evaluate the value creation of corporate venture capitalists relative to independent 

venture capitalists. We obtain the list of IVCs from SDC Platinum VentureExpert database. We obtain 

data on 11,556 venture capital firms out of which 10,164 are independent VCs, 926 are CVCs, and 466 

are unclassified or foreign investors. For each IVC and a specific date (e.g., financing round date, exit 

date, or IPO date) we compute five different reputation measures: (i) the age of the IVC measured as a 

number of years since VC firm date of birth; (ii) the amount of funds raised by the VC firm over the 5 

9 

We exclude the CVC funds with foreign corporate backing to eliminate a possible sample selection bias. 

10 

In addition we use segment data from Compustat to identify segments’ SIC codes for public corporations (the data is available 

from 1992 onwards). 

9

years prior to the date of interest (similar to Gompers and Lerner (1998)); (iii) total dollar amount raised 

by an IVC since 1965; (iv) number of rounds the IVC firm participated in since 1965; (v) total dollar 

amount invested since 1965. We use these measures to control for the presence of IVC investment in an 

entrepreneurial firm since CVCs tend to co-invest with independent venture capitalists. 

3.3 Round Financing Data 

To evaluate the investment patterns of venture capitalists we use data on round-by-round investments 

by VCs provided by SDC Platinum VentureExpert. Here we can classify the data into two groups. First, 

we obtain information about the set of firms that obtained venture capital financing in the period of 1980 

to 2004. We exclude financial firms, firms that obtained round financing prior to 1980, firms with 

unclassified venture capital investments (e.g., those with foreign VC investors), and those with missing or 

inconsistent data. This gives us 24,549 distinct firms. VenureExpert provides us with the following 

information: (i) date of first and last round of financing; (ii) number of financing rounds; (iii) firm’s 

development stage at first investment round; (iv) SIC code; (v) date the firm was established; (vi) date 

and type of exit (e.g., IPO, acquisition, or write-off). We further update and cross-reference this 

information with other databases. Specifically, we update and fill in the missing values for SIC codes 

using Compustat data for already public firms and D&B and CorpTech Explore Databases for private 

firms. We find that the SIC codes provided by these databases coincide with ones provided by 

VentureExpert in 76% of the cases at 3 digit level and in 82% at 2 digit level. We further update and fill 

in the missing observations for the date the firm was established. We use Jay Ritter’s database for the 

subset of firms that went public and D&B and CorpTech Explore Databases for firms remaining private. 

Second, VentureExpert provides the information about venture round by round disbursements 

obtained by entrepreneurial firms. Between 1980 and 2004 there were 140,915 investment rounds by 

individual venture capitalists in portfolio firms. Here we can observe numerous characteristics of the 

financing round including: (i) identity of the investing VCs; (ii) round number; (iii) amount invested this 

round; (iv) total amount invested this round; and (v) post-round valuation. 

10

Table 1 presents the summary statistics for the round-by-round financing. Panel A and Panel B 

present characteristics of round investments by CVCs and IVCs respectively in CVC backed firms. 

Panel C on the other hand reports these characteristics for IVC financing rounds in firms that are backed 

by IVCs alone. We observe that CVCs tend to invest in younger firms at earlier financing rounds 

compared to IVCs both in CVC and IVC backed entrepreneurial firms. Second, they invest significantly 

larger dollar amounts reaching on average $3.6 million compared to around $2 million invested per round 

by IVCs. Finally, CVC backed firms on average tend to be valued higher than IVC backed firms: $124 

million for CVC backed firm versus $55 million for IVC backed firm. 

3.4 Sample of IPO firms 

Significant section of the paper evaluates how CVCs affect an entrepreneurial firm’s access to the 

secondary market. Specifically, we compare the characteristics of CVC and IVC backed IPO firms. To 

accomplish this, we obtain the list of IPOs of equity from 1980 to 2004 from the SDC Platinum New 

Issue Database. In common with many other studies of IPOs, we eliminate equity offerings of financial 

institutions (SIC codes between 6000 and 6999) and regulated utilities, as well as issues with offer price 

below $5. The IPO should issue ordinary common shares and should not be a unit offering, closed-end 

fund, real estate investment trust (REIT), or an American Depositary Receipt (ADR). 11 Moreover, the 

issuing firm must be present on the Compustat annual industrial database for the fiscal year prior to the 

offering, as well as on the University of Chicago Center for Research in Security Prices (CRSP) database 

within three months of the issue date. 

We merge this IPO list with the VentureExpert database to construct consistent venture backing and 

corporate venture backing flags. We find that 287 of IPO companies have venture investments as reported 

by VentureExpert database but are classified as non-VC backed in SDC Platinum. We consider these 

firms to be VC backed. Similarly 365 are classified as VC backed in SDC Platinum but are not recorded 

11 

We do not rely on SDC classifications alone for identifying IPOs of ordinary shares. We independently verify the share type 

using CRSP share codes. 

11

in the VentureExpert database. We exclude these IPO firms from consideration if the information on the 

identity of the investing VCs is unavailable through SDC Platinum. We also exclude IPO firms with 

investments from venture capitalists that we were unable to classify in CVC or IVC sub-sets or where the 

data on venture investment is inconsistent across two databases. At the end we are left with 5,411 IPO 

firms where 2129 are backed by venture capitalists and 462 of latter are backed by corporate venture 

capitalists. The characteristics of the IPO firms in our sample are similar to those presented in other IPO 

studies (see, e.g., Loughran and Ritter (2003)). 12 

4. Investment Patterns and Financing Terms of CVCs and IVCs 

The first part of our analysis investigates whether the unique institutional features of CVCs prompts 

them to invest in different kinds of firms compared to IVCs, and provide funding to firms at different 

stages in their life cycle relative to IVCs. Second, we investigate whether the terms of financing offered to 

entrepreneurial firms differs across CVCs and IVCs. 

4.1 Investment Patterns 

There are a number of differences in institutional structure and the objectives of corporate and 

independent venture capitalists: while IVCs are primarily concerned with the financial returns from their 

portfolio firms, CVCs may also be concerned with other benefits to the corporate parent that may arise 

from the investment, such as exposure to a pioneering technology and early establishment of alliances in 

the product market. Such non-financial motivations may prompt CVC to invest in younger firms in 

familiar industries. Further, the industry and technology expertise of CVCs may allow them to screen 

firms better, which may allow them to invest larger amounts in riskier and more R&D intensive firms 

(with longer time to achieving profitability) compared to IVC investments. To evaluate these hypotheses 

we study the differences in the investment patterns between CVCs and IVCs. 

12 The characteristics of IPO firms are not reported and are available upon request. 

12

We start with the probit analysis of round investments. The dependant variable is a dummy equal to 

1 for financing rounds backed by a CVC and zero otherwise. The independent variables can be classified 

into three groups. First, we analyze individual firm-round characteristics such as age of the 

entrepreneurial firm at the round date, round number, total amount required by the firm this round (log of 

total amount invested this round), and total amount of prior investment. These variables reflect the 

maturity of the portfolio firm as younger firms in the earlier rounds of their development are likely to 

have small prior investments and hence require larger investments this round. 

Second, we consider the entrepreneurial firm industry characteristics. Since we do not observe 

balance-sheet data for the portfolio firms we measure their industry characteristics using aggregate 

variables for already public firms. Specifically, based on an entrepreneurial firm’s SIC code we construct 

industry-wide variables by averaging the characteristics of public firms in the same industry in the year 

prior to the financing round. First, we consider capital and R&D expenditures that are likely to capture the 

growth option features of the industry. Second, sales growth over the three years prior to the financing 

round reflects past industry growth. Third, we compute the equal-weighted industry portfolio return over 

the six month prior to the financing round date to capture the effect of hot versus cold industries. Forth, 

we estimate the beta of the industry portfolio over the 36 months prior to the financing round date to 

capture the risk of the portfolio firms. Finally, to evaluate the degree of competition faced by the 

entrepreneurial firms we compute industry Herfindahl index and the market share of the largest firm in 

the industry based on prior year sales. These variables allow us to compare the industry characteristics of 

CVC backed versus IVC backed firms. 

Third, we consider the reputation of existing IVCs (discussed earlier). Since the dominant share of 

venture investments are follow on investments it is important to understand whether CVC are leaders or 

followers in an entrepreneurial firm, whether they invest when there is a high reputation IVC is already in 

charge or prefer to make the pioneering investment in a firm. 

The results of this probit analysis are reported in Table 2a. Panel A presents the results where the 

industry characteristics are constructed based on 2 digit SIC code industry definition. Panel B presents the 

13

esults when industry is defined using the Fama-French industry definition. First, we find that, consistent 

with our hypothesis, CVCs tend to invest in younger firms at earlier rounds: the coefficients of firm age 

and round number are positive and significant at the 1% level. CVCs also invest in firms that require 

significantly larger investments (those with smaller prior investment). Second, CVCs provide funding to 

more capital and R&D intensive firms than IVCs. The positive and significant coefficient of industry beta 

suggests that CVC-backed firms come from riskier industries. These industries also tend to be more 

competitive as the coefficient of the Herfindahl index and market share of the largest firm in the industry 

are negative. We don’t find robust evidence that prior industry stock return performance or operating 

(sales growth) performance significantly affect CVC’s choice of portfolio firms. Finally, we find that 

CVC tend to invest in firms where the reputation of existing IVCs is relatively low. Since, we control for 

the round number of the investment, the positive coefficient of IVC reputation suggests that CVCs are not 

followers. Rather, they are more likely to invest in firms that lack high quality independent venture 

capitalists: in other words, in firms where their industry expertise will be most appreciated. 

In the second part of our analysis of the investment patterns of CVCs and IVCs we evaluate the 

match between the CVC and the entrepreneurial firm affects CVCs’ decision to invest. Specifically, we 

attempt to answer two questions. First, are CVCs more likely to invest in firms in an industry related to 

that of the CVC parent? Second, does a prior relationship with existing investors in a firm drive CVC 

investment in that firm? Again, we evaluate whether CVCs are followers investing in firms with familiar 

venture capitalists present or rather invest independent of any prior relationships. To evaluate these 

questions we need to observe not only the entrepreneurial firms that obtained CVC investments, but also 

those denied such investments. We cannot observe the latter set of firms but we do observe the firms that 

obtained IVC (but not CVC) financing. In our analysis we assume that those firms were also potential 

recipients of CVC financing. Using these two sub-sets of firms (those receiving CVC investment and 

those receiving only IVC investments) we conduct a probit analysis where the dependant variable is 

constructed as detailed in Figure 1. We match each CVC round investment with other financing rounds 

that occurred within one month of CVC investment date. We assume that this sub-set contains firms that 

14

could have received CVC financing but did not receive it. Consequently, the dependant variable in our 

probit analysis is equal to one for an investment round backed by CVCs, and zero for investment rounds 

in firms that could have received CVC funding, but did not. 

In addition to firm characteristics and other control variables considered earlier, we construct two 

sets of variables of interest. First, to evaluate whether industry match between a CVC parent and an 

entrepreneurial firm drives CVC investment, we construct dummy variables that are equal to one if CVC 

corporate parent and the portfolio firm are in the same industry as defined by 2 digit SIC code, 3 digit SIC 

code, 4 digit SIC code, and Fama-French industry classification respectively. Second, to evaluate whether 

prior relationship with IVCs affect the investment pattern of CVCs, we construct three measures of the 

relationship between the investing CVC and an IVC who have already invested in the portfolio company 

under consideration: (i) the number of entrepreneurial firms CVC and IVC co-invested in before the 

round date under consideration; (ii) the number of financing rounds CVC and IVC co-invested in before 

the round date; and (iii) the number of years since first joint investment by the CVC and the IVC. We 

then aggregate these variables across all IVCs who have already invested in the portfolio firm. 

Table 2b reports the results of our probit analysis. We find that industry match is very important in 

CVC’s choice of portfolio firms. The coefficients of industry match dummies are positive and significant 

independent of industry classification (SIC code or Fama-French industry). Further, the coefficient of 

proxies of the prior relationship between CVCs and IVCs are negative, this is also the case for 

coefficients of the reputation of existing IVCs. This is consistent with the idea that corporate venture 

capitalists tend to step in when the existing IVCs lack reputation (and expertise) to evaluate the 

entrepreneurial firm’s product and/or technology. 

Overall, our results in this section suggest that the investment patterns of CVC are significantly 

different from that of IVCs. CVCs tend to invest in younger and riskier firms and in earlier rounds 

compared to IVCs. These firms tend to be in less mature industries which require significantly larger 

R&D and capital expenditures, and which are more competitive (have no dominant firm in the product 

market). CVCs are more likely to select portfolio companies in industries closely related to that of their 

15

corporate parent. Finally, CVCs do not seem to be mere followers of independent venture capitalists. In 

fact they are more likely to invest when the existing IVCs lack knowledge, so that CVCs’ expertise is 

most valuable. 

4.2 Terms of Financing of CVC Backed and IVC Backed Firms 

The unique features of corporate venture capitalists as compared to independent venture capitalists 

might not only generate the investment patterns differences but also lead to different terms of financial 

contracting. In this sub-section we compare two characteristics of the CVC and IVC financing rounds: 

First, we compare the amount invested by two kinds of venture capitalists in portfolio firms. Since 

managers of CVC funds do not enjoy the performance based compensation to the same degree as those of 

IVC funds, one might argue that CVCs are likely to exhibit less caution in selecting portfolio companies 

and hence invest significantly large amounts of money. Second, we directly evaluate contracting terms by 

comparing the valuation across financing rounds with CVC backing with those backed by IVCs alone. 

Specifically, we study the difference in the company post-round valuation relative to the amount invested. 

This ratio is equivalent to the entrepreneurial firm’s equity share transferred to VCs for $1million 

invested in each round. 

Panel A of Table 3 reports the results of the regression analysis of the round amount invested by 

various venture capitalists. The dependant variable is the log of the total dollar amount invested in an 

entrepreneurial firm by an individual venture capitalist each round. Thus, the unit of observation is firm- 

round-VC. Our main variables of interest are the characteristics of CVC backing: (i) CVC backing 

dummy and (ii) CVC-portfolio firm industry match dummy. The latter is equal to one if the corporate 

parent for the CVC investor and the portfolio firm are in the same industry as defined by the Fama-French 

industry classification. We use a number of control variables in our analysis. First, we control for 

entrepreneurial firm-round characteristics: age at the round date, relationship to the internet technology, 

round number, and presence of prior CVC investments. Second, we control for the quality of the IVCs 

that have already invested in the firms before the round date. Finally, we include year and entrepreneurial 

16

firms’ industry dummies to account for trends in the venture capital industry (e.g., aggregate funding 

availability and hot or cold industry preferences). 

Consistent with our univariate analysis results, we find that corporate venture capitalists tend to 

invest significantly more money than IVCs in a given financing round. This effect is most pronounced for 

the sub-set of entrepreneurial firms that are in the same industry as the CVC’s corporate parent. This 

evidence suggest that CVCs create value for the entrepreneurial firm by providing them with large capital 

inflows and showing a significant bias toward financing companies that they can potentially screen and 

monitor better (those in an industry related to their corporate parent). In addition, we observe that venture 

capitalists, both CVCs and IVCs, tend to invest more in younger, less developed firms, in the later rounds 

of their financing. The positive coefficients of the various IVCs reputation proxies is likely to reflect the 

fact that more reputable IVCs tend to have larger portfolios (in terms of dollar amount) and hence are 

better positioned to invest in firms that require larger capital injections. 

Panel B of Table 3 presents the results of our regression analysis of the firm equity share transferred 

to the venture capitalists in return for each $1 million investment. The dependant variable is the post- 

round firm value divided by the dollar amount invested by all venture capitalists this round. Thus the unit 

of observation is firm-round. The set of the independent variables is similar to that of Panel A. The main 

variable of interest is the CVC backing dummy that is equal to one if at least one CVC participated in this 

financing round. Since the post-round firm valuation is only available at the firm-round level and there 

are a number of rounds with multiple CVCs investing in a firm we cannot disentangle how corporate 

venture capitalists value firm in a related industry. 

We find that corporate venture capitalists value entrepreneurial firms backed by them significantly 

higher than IVCs. Per million dollar invested they receive on average 4.1% less of the entrepreneurial 

firm’s equity than IVCs. Thus, the effect is not only statistically but also economically significant. These 

result might reflect the lower bargaining power that CVCs may have with respect to portfolio firms 

compared to that of VCs. It is also consistent with CVCs having non-financial motivations as well as 

direct financial motivations in investing in portfolio firms. 

17

5. Exit Strategies of CVC and IVC Backed Entrepreneurial Firms 

This section presents the first set of results pertaining ability of corporate venture capitalists to aid 

the entrepreneurial firms in efficiently accessing the equity market. Here we compare the abilities of 

CVCs and IVCs in bringing firms backed by them public or in helping them in being acquired. 

Specifically we compare CVC and IVC backed firms in terms of going public (IPO firms), being 

acquired, being written off (writeoffs), and active investments. 13 

5.1 Univariate Analysis 

Table 4a presents the average characteristics of the CVC backed and IVC backed entrepreneurial 

firms by the type of exit. All characteristics are recorded at the date of the exit for IPO firms, acquired 

firms, and writeoffs or at the last investment date for the active investments. The table documents a 

number of interesting results. 

First, we find that CVC backed entrepreneurial firms enjoy higher rates of successful exit (IPO or 

acquisition) when compared to IVC backed firms. Over the period from 1980 to 2004, 18.3% of CVC 

backed firms went public and 10.2% were acquired while the number for IVC backed firms were 13.3% 

and 8.3%, respectively. At the same time, CVCs are associated with a larger share of companies written 

off: 22.3% versus 17.9% for IVC backed firms. 

Second, consistent with the results documented earlier, we find CVC backed entrepreneurial firms to 

be 2.5 to 4 years younger at the exit date (both IPO and acquired firms) than IVC backed firms. The CVC 

backed firms also enjoy significantly higher venture capital inflows compared to IVC backed firms: 

$56 mil versus $31 mil for IPO firms, $45 mil versus $19 mil for acquired firms, and $38 mil versus 

$18 mil for write-offs. Not surprisingly, this higher investment amounts are associated with the larger 

number of rounds and the larger number of distinct venture capitalists involved with CVC backed 

entrepreneurial firms compared to IVC backed firms. Nevertheless, both CVC and IVC backed firms 

13 We consider a firm to be written off if it hasn’t received any venture round financing for five years in a row. 

18

experience similar time from first venture investment till exit 2.7-2.9 years for acquired firms and 4.2 

years for IPO firms. 

Third, the reputation of existing IVCs is similar across CVC and IVC backed entrepreneurial firms 

that went public; it is also higher for CVC backed firms that were acquired or written off compared to 

IVC backed firms. This suggests that CVCs prompt high reputation IVC to co-invest with them. 

Finally, Table 4a allows us to compare the characteristics of CVC backing for various sub-samples 

of entrepreneurial firms. We find that CVCs on average enter later both in terms of entrepreneurial firms’ 

age and entrance round number into IPO firms compared to entrance into firms that were later acquired or 

written off. Further, CVCs invest more in companies that later go public than in those that were later 

acquired or written off. In addition, we observe that IPO companies backed by CVCs enjoy a higher 

number of VC corporate parents in a related industry compared to IVC backed acquired firms. The latter 

suggests that industry match with the corporate parent aids the entrepreneurial firm in going public and 

accessing the secondary market. 

5.2 Multivariate Analysis of Exit Strategies 

The univariate analysis suggests that CVC backed entrepreneurial firms have a higher probability of 

successful exit as measured by IPO or acquisition. In this section we present a more rigorous analysis of 

the exit strategies where along with CVC backing we control for a number of other firm characteristics 

that can potentially affect the likelihood of a firm to have having a successful exit. 

Panel A of Table 4b presents a probit analysis of the propensity for a successful exit. The dependant 

variable is a dummy equal to 1 if the entrepreneurial firm has an IPO or acquisition and 0 if it is written 

off by the venture capitalist. To evaluate the effect of CVC backing, we consider various measures of the 

degree of firm backing by corporate venture capitalists (e.g., we want to discriminate between 

entrepreneurial firms entirely financed by CVCs versus those that only obtained 5% from CVCs and the 

remaining investment was provided by IVCs). Here we control for the reputation of existing independent 

venture capitalists, log of total dollar amount invested by all VCs, and the age of the entrepreneurial firm. 

19

Further we include a dummy indicating whether the firms’ product is related to an internet technology and 

also include the 6 month equal-weighted return on a portfolio of already public firms in the same Fama- 

French industry as the entrepreneurial firm. The latter variable captures the hot market effect (i.e. internet- 

bubble period or hot or cold IPO market year). 

While CVC backing does not directly affect an entrepreneurial firm’s propensity to have a successful 

exit, the CVCs’ presence improves the entrepreneurial firms’ chances for successful exit indirectly. We 

find that the higher the total amount invested by all venture capitalists and the higher the reputation of 

existing IVCs, the higher is a firm’s likelihood of having an IPO or an acquisition. Earlier, we showed 

that CVCs tend to invest significantly larger amounts than IVCs. In addition, we can see that CVCs attract 

high reputation IVCs to co-invest with them. 

In Panel B of Table 4b we conduct a similar probit analysis where we evaluate the propensity of a 

firm to have an IPO versus acquisition. We find that CVC backing positively affects the likelihood of a 

firm going public both directly (through a number of CVCs) and indirectly (through investing larger 

amounts). In Panel C we evaluate the time from first VC investment to exit (IPO or acquisition) for CVC- 

backed and IVC backed firms. The results show that it takes longer for a CVC backed entrepreneurial 

firm to go from the first venture investment to a successful exit. 

Overall, our evidence suggests that CVC backed companies are more likely to go have successful 

exit than IVC backed firms. Further, the probability of having an IPO rather than an acquisition is greater 

for a CVC backed firm. The longer time from first venture capital investment to exit attributed to CVC 

backed firms is consistent with our earlier findings that CVCs invest in younger firms, in less mature 

industries, and in earlier rounds (which may take longer time to reach profitability). 

6. Post-IPO Performance of CVC and IVC Backed Firms 

In this section we investigate whether corporate venture capital backing generates higher product 

market value for entrepreneurial firms by comparing the post-IPO operating performance of CVC and 

IVC backed firms. Our objective here is to determine whether the pool of firms going public with CVC 

20

acking is of higher quality (in other words, having the ability to generate superior operating 

performance) compared to the pool of firms going public with IVC backing. We also want to conduct a 

similar comparison between IPOs with high and low amounts invested by CVCs. In order to study 

whether the pool of firms backed by CVCs is different from that of firms backed by IVCs, we use two 

measures: post-IPO operating performance and post-IPO delisting probabilities. 

6.1 Post-IPO Operating Performance 

We compare the operating performance of various IPO sub-samples using two approaches. First, we 

compare unadjusted operating performance measures for the full samples of CVC backed versus IVC 

backed firms, and high-CVC-investment versus low-CVC-investment firms. Second, we use a matching 

approach where each CVC backed (high-CVC-investment) company is matched to an IVC backed (low- 

CVC-investment) firm based on year, Fama and French (1997) industry, and size measured by total 

assets. In doing so, we ensure that each CVC backed (high-CVC-investment) company receives a unique 

match. We then compare the operating performance of the two samples of matched firms. 14 

To measure operating performance, we use the following characteristics: (1) profit margin (net 

income including extraordinary items (Compustat item 172) divided by sales); (2) EBITDA as a 

percentage of assets (Compustat item 6); (3) EBITDA sales margin; (4) return on assets (net income 

including extraordinary items over book value of assets); (5) share of capital expenditures (Compustat 

item 128) in assets; (6) share of R&D (Compustat item 46) in assets; and (7) growth in sales. 

Tables 5a presents our analysis of the operating performance of various IPO sub-samples. We report 

the operating performance characteristics for the pre-IPO year (year 0) and five years post-IPO (1 through 

5). Panel A provides median non-adjusted operating performance characteristics calculated using full IPO 

sub-samples. Panel B on the other hand gives statistics for the pair-matched sub-samples. 

14 It is important to note that, in our setting, it is inappropriate to use the matching firm approach suggested by Barber and 

Lyon (1996), which advocates choosing a matching (benchmark) firm based on prior profitability and size. Matching on prior 

profitability would be appropriate only if we wished to determine whether there is a change in operating performance of firms 

subsequent to the IPO. Since our objective here is to detect differences in the quality (performance) of the pool of firms going 

public with CVC backing and those going public with IVC backing, matching on pre-IPO operating performance would be 

inappropriate, since this is equivalent to minimizing the quality difference we are attempting to detect. 

21

Surprisingly, we find that CVC backed IPOs exhibit significantly lower profitability margins pre- 

and post-IPO (years 0 to 4) than do IVC backed companies. However, even though the CVC backed IPOs 

are losing money dramatically in the year prior to IPO and in the post IPO years their profitability 

improves significantly over four years post-IPO and is statistically insignificant from that of IVC backed 

firms five years post-IPO. In addition, CVC backed firms have consistently higher R&D and capital 

expenditures as well as sales growth in post-IPO years when compared to IVC backed firms. However, 

we find no significant differences in the operating performance characteristics of high-CVC-investment 

and low-CVC-investment IPO firms. 

Our evidence is inconsistent with the premise that corporate venture capitalists help the 

entrepreneurial company to develop product market alliances and reach profitability at an earlier stage in 

their life (possibly before the IPO date). It is, however, consistent with CVC backed entrepreneurial firms 

being able to go public at a younger stage in their life, and having longer gestation periods prior to 

profitability. Further, the higher capital and R&D expenditures as well as higher sales growth that we 

document indicate that CVC backed IPO firms have greater growth options compared to IVC backed IPO 

firms. 

6.2 Post-IPO Delisting Probabilities of CVC Backed and IVC Backed Firms 

In addition to the operating performance characteristics of IPO companies, we analyze the 

probabilities of delisting of CVC backed and IVC backed firms within 5 years post IPO. Panel A of 

Table 5b reports the percentage of IPO companies de-listed due to liquidation (delisting code DLSTCD 

between 400 and 499 or between 520 and 600). Panel B reports the share of IPO companies de-listed due 

to merger or acquisition (delisting code DLSTCD between 200 and 299). The delisting data comes from 

the CRSP Daily Events file. The probability of delisting should be negatively correlated with IPO firms’ 

quality, while the probability of being acquired should be positively correlated with IPO firms’ quality. 

Consistent with our operating performance results, we find that CVC backed IPO firms are more 

likely to be delisted within three years post-IPO compared to IVC backed firms. In addition, high-CVC- 

22

investment IPO firms are more likely to be delisted than low-CVC-investment IPO firms within five years 

post-IPO. The likelihood of being acquired is similar across CVC and IVC backed firms as well as across 

high-CVC-investment and low-CVC-investment IPO firms. Similar to our operating performance results, 

this evidence does not directly support the notion that CVCs add greater product market value to the firms 

backed by them compared to IVCs. These results, however, are consistent with CVC backed firms going 

public at an earlier stage of their development compared to IVC backed IPO firms. 

7. Participation of Reputable Underwriters, Institutional Investors, and Analysts in CVC Backed 

and IVC Backed IPOs 

In this sub-section we analyze CVCs’ ability to ease entrepreneurial firms’ access to the secondary 

market. Specifically we analyze whether the presence of corporate venture backing in an IPO company 

attracts participation by better quality and larger number of various market players in the IPO of CVC 

backed firms compared to their participation in IPOs backed by IVCs alone. On the one hand, we 

anticipate that IVCs, being more frequent players in the IPO market, will be able to attract better quality 

and higher extent of participation by underwriters, institutional investors, and analysts. On the other hand, 

CVC backing may signal higher firm quality to these market players, prompting them to participate in the 

firm’s IPO in larger numbers. To evaluate these hypotheses, we compare CVC and IVC backed IPOs in 

terms of the reputation of the underwriters involved; the number of institutional investors participating in 

IPO; and institutional investor holding as a fraction of IPO shares sold; the extent of analyst coverage 

immediately post-IPO; and the reputation of IVCs investing in the firm (recall that many CVC backed 

firms also have IVCs coinvesting with them).. 

7.1 Participation by Reputable Underwriters 

In this sub-section we study the reputation of underwriters associated with CVC and IVC backed 

IPOs. Panel A of Table 6a reports the summary statistics of average underwriter reputation associated 

with different IPO sub-samples. We use two measures of underwriter reputation. First, we analyze the 

23

measure of underwriter reputation used by Loughran and Ritter (2003). Second, similar to Loughran and 

Ritter (2003), we use a dummy for the underwriter reputation that takes a value of 1 if the reputation 

measure is 8 or higher. 

Our results show that the average underwriter reputation for CVC backed firms is higher than that 

for IVC backed firms (8.02 versus 7.45). The percentages of the companies with a high-reputation 

underwriter are 82% for CVC backed issuers versus 67.9% for IVC backed issuers. The evidence clearly 

suggests that CVC backed IPOs are associated with higher quality underwriters compared to IVC backed 

IPOs. The differences are statistically significant at the 1% level. 

In addition to the univariate analysis we conduct a regression analysis that allows us to control for 

various other factors affecting quality of underwriters. Along the traditional control variables such as size 

(log of total assets) and share of the firm equity sold in IPO we include: (i) reputation of existing IVCs; 

(ii) operating performance characteristics. We argue that presence of IVCs co-investing with CVCs might 

affect quality of underwriters (as well as other reputable market players). In addition, higher quality 

underwriters might be more selective in choosing IPO companies to run books for and are likely to back 

higher quality (as measured by profitability and/or growth) firms. Panel A of Table 6b presents the results 

of the regression analysis. Consistent with the univariate analysis results we find that CVC backing 

improves quality of underwriters for IPO firms. Furthermore, the higher the CVC share of total venture 

investment in an IPO firm, the better the underwriters’ quality. 

7.2 Participation by Institutional Investors 

In this sub-section we analyze the influence of corporate venture capitalists on institutional investors’ 

participation in IPOs backed by them. We study two measures of institutional investors’ involvement in 

IPOs. First, we evaluate the number of institutional investors investing in an IPO firm. Second, we look at 

first quarter post-IPO institutional investor holdings as a percentage of the number of shares sold in the 

IPO. We obtain institutional investors holdings data for IPOs in years 1980 to 2004 from the Spectrum 

Institutional (13f) Holdings Database of Thomson Financial. 

24

Panel B of Table 6a reports the results of our analysis of institutional investors’ participation 

measures. The measures are unanimous. Relative to IVC backed IPOs, CVC backed IPOs have around 

19% higher percentage of shares sold in the IPO held by institutional investors, and 7.6 more institutional 

investors involved. These differences are not only statistically but also economically significant. 

Since the degree of institutional investors’ participation may also be affected by better quality 

underwriters (in addition to venture capital backing), IVC backing, and quality of an IPO firm going 

public, we control for these effects through a regression analysis of institutional investor participation 

reported in Panel B of Table 6b. In this analysis we find that the presence of corporate venture backing 

adds 3.37 additional institutional investors to the IPO firm; each additional CVC investor brings on 

average of 2 more institutional investors. Furthermore, the degree of participation by institutional 

investors is positively related to the CVC amount invested in a company normalized by total venture 

investment, and the presence of a CVC parent(s) in an industry related to the IPO firm. The positive sign 

of the size coefficient suggests that institutional investors are indeed more likely to invest in bigger IPOs. 

7.3 Analyst Coverage of IPO Firms 

In Panel C of Table 6a we present a univariate analysis of analyst coverage of IPO firms. The data is 

taken from the I/B/E/S database. We evaluate a percentage of IPOs with analysts coverage as well as the 

number of distinct analysts issuing annual forecasts within a year after a firm’s IPO date. 15 The number of 

analysts is assigned to be zero if there is no information about the company in I/B/E/S. 

We find that a significantly larger percentage of CVC backed firms receive analyst coverage and that 

these firms are followed by a larger number of analysts compared to IVC backed IPO firms. We find that 

analysts follow 93% of CVC backed IPOs versus 86% of IVC backed IPOs. CVC backed firms also enjoy 

roughly 1.7 more analyst following than IVC backed firms. 

15 

We also conduct the analyst coverage analysis based on quarterly earning forecasts in I/B/E/S and obtain qualitatively similar 

results. 

25

In the regression analysis presented in Panel C of Table 6b, we control for numerous factors that are 

likely to affect analyst coverage along with CVC backing. Here the dependent variable is the number of 

analysts following the firm within a year after its IPO date. We find that the presence of corporate venture 

capitalists, number of CVCs, share invested by CVC relative to total venture investment, and the presence 

of a corporate parent in an industry similar to that of the IPO firm positively affect analysts following. 

The effects are both economically and statistically significant. 

7.4 Participation of IVCs in CVC Backed IPO Firms 

Finally, we analyze the quality (reputation) of independent venture capitalists co-investing with the 

CVC in IPO firms. We compare four distinct measures of the independent venture capitalist reputation 

across CVC and IVC backed IPOs: (i) average age of IVCs backing an IPO firm; (ii) dollar amount 

invested by these IVCs since 1965; (iii) average number of rounds the IVCs participated in since 1965; 

and (iv) dollar amount of funds raised over 5 years prior to IPO. To construct these IVC reputation 

proxies we use data reported in the VentureExpert database of SDC Platinum. We find that the average 

reputation of IVCs co-investing with corporate venture capitalists is no different from that investing in 

firms backed by IVCs alone. 

7.5 Summary and Interpretation of Results 

Contradictory to what one might expect from the fact that IVCs are more frequent players in the IPO 

market compared to CVCs, we find that the extent and quality of participation by various market players 

are higher for CVC backed IPOs than for IVC backed IPOs. The underwriter reputation, participation by 

institutional investors, and analyst coverage are higher for CVC backed IPOs compared to IVC backed 

IPOs even after we control for various other factors that can potentially affect the participation of 

reputable market players. Furthermore, the reputation of IVCs co-investing with CVCs in CVC backed 

IPO firms is similar (i.e., not lower than) the reputation of IVCs investing in IPO firms backed by IVCs 

alone. The fact that despite bringing younger firms, further away from profitability (on average) to the 

26

IPO market, CVCs are able to attract greater participation by more reputable market players indicates a 

signaling role of CVC backing in IPOs: i.e., backing by CVCs with superior industry knowledge seems to 

effectively communicate to various other market players that the IPO firms backed by them are high 

quality firms with good future prospects. 

8. Valuation of CVC Backed and IVC Backed Firms at IPO 

In this section we study stock valuation of CVC backed and IVC backed IPOs. In an IPO market 

characterized by significant asymmetric information between firms issuing equity and outside investors, 

the ability of financial intermediaries such as venture capitalists to credibly communicate information 

about the true values of firms backed by them becomes very important. The analysis of the valuations of 

CVC and IVC backed IPO firms allows us to compare the ability of these two kinds of venture capitalists 

to reduce the degree of asymmetric information in the IPO market. One would expect firms backed by the 

intermediary with a greater ability to communicate their private information about the future prospects of 

the firm going public to equity market investors to be awarded higher valuations. 

8.1 Methodologies Used to Compute Intrinsic Firm Value 

The first approach we use to estimate the intrinsic value of IPO companies is a matching technique 

based on an industry peer with comparable Sales and EBITDA profit margin (EBITDA/Sales) similar to 

that used by Purnanandam and Swaminathan (2005). Here we limit our consideration to the subset of IPO 

(and matching public firms) that have positive EBITDA and Sales. We first consider all firms in 

Compustat that were active and present on CRSP for at least three years at the end of the fiscal year 

preceding the IPO. We then eliminate firms that are REITs, closed-end funds, ADRs, not ordinary 

common shares, and firms with stock prices less than $5 at the report date. We separate the remaining 

population of Compustat firms into 48 industry groups based on the industry classification introduced by 

27

Fama and French (1997). 16 For each year, we divide each industry portfolio into three portfolios based on 

sales, and then separate each sales portfolio into three portfolios based on EBITDA profit margin 

(EBITDA/Sales). This procedure gives us nine portfolios for each industry-year. 17 Each IPO firm is then 

placed into an appropriate year-industry-Sales-EBITDA margin portfolio based on an IPO firm’s sales 

and EBITDA in year prior to IPO. Within the portfolio, we find a matching company that is closest in 

sales to the IPO firm being valued. We then estimate “the intrinsic value” of the IPO firms based on the 

price multiples of their matching firms. 

The offer price to the intrinsic value ratio for each IPO firm (OP/IV) is calculated by dividing the 

offer price multiple by the comparable firm multiple. The offer price multiples are computed as follows: 

⎛ 

⎜ 

⎝ 

⎛ 

⎜ 

⎝ 

OP ⎞ 

⎟ 

Sales ⎠ 

OP ⎞ 

⎟ 

EBITDA ⎠ 

⎛ OP ⎞ 

⎜ ⎟ 

⎝ E ⎠ 

IPO 

IPO 

IPO 

Offer Pric e × CRSP Shares Outstanding 

= 

Prior Fiscal 

Year Sales 

= 

= 


Prior Fiscal 

Year EBITDA 


Prior Fiscal 

Year Earnings 

In the above, CRSP shares outstanding refers to the shares outstanding of the IPO firm at the first 

secondary market trading day as recorded in CRSP. The price multiples for a matching firm are computed 

as follows: 

⎛ 

⎜ 

⎝ 

⎛ 

⎜ 

⎝ 

P 

Sales 

⎞ 

⎟ 

⎠ 

P ⎞ 

⎟ 

EBITDA ⎠ 

⎛ P ⎞ 

⎜ ⎟ 

⎝ E ⎠ 

Match 

Match 

Match 

= 

= 

= 

Market Pri ce × CRSP Shares Outstanding 

Prior Fiscal 

Year Sales 


Prior Fiscal 

Year EBITDA 


Prior Fiscal 

Year Earnings 

16 The industry portfolios are constructed using 4 digits SIC codes from Compustat. For robustness, we also implement this 

methodology using 2-digit SIC codes as industry classification criteria. 

17 We insist, however, that at least three firms should be in each portfolio. If the number of firms in the industry does not allow us 

to form 9 portfolios, we limit the separation to two portfolios based on Sales with further separation into two portfolios based on 

EBITDA profit margin, sometimes we consider only one portfolio. 

28 

(1.1) 

(1.2) 

(1.3) 

(2.1) 

(2.2) 

(2.3)

Market price is CRSP stock price and CRSP shares outstanding is the number of shares outstanding 

of the matching firm at the close of the day closest to the IPO offer date. OP/IV ratios for each IPO firm 

based on various multiples are then computed as follows: 18 

⎛ OP ⎞ 

⎜ ⎟ 

⎝ IV ⎠ 

⎛ OP ⎞ 

⎜ ⎟ 

⎝ IV ⎠ 

⎛ OP ⎞ 

⎜ ⎟ 

⎝ IV ⎠ 

Sales 

EBITDA 

Earnings 

(OP/Sales) 

= 

(P/Sales) 

IPO 

Match 

(OP/EBITDA) 

= 

(P/EBITDA) 

(OP/E) 

= 

(P/E) 

IPO 

Match 

IPO 

Match 

In addition to the comparable firm approach discussed above, we compute the intrinsic value of IPO 

firms using the discounted cash flow method introduced by Ohlson (1990). Here we do not require IPO 

firms to have positive sales and EBITDA in the year preceding the IPO. Thus, the discounted cash flow 

approach we implement only requires the book value of equity and earnings (whether positive or 

negative) to be available for three years post IPO. It also requires the calculated intrinsic value to be 

positive. Following Ohlson (1990), the fair value of a firm’s shares is calculated as follows: 

29 

(3.1) 

(3.2) 

(3.3) 

EPS − r * B 

1 

0 EPS 2 − r * B1 

IV = B + 

+ 

+ TV . (4) 

0 

2 

1 + r ( 1 + r) 

Here B 0 is the book value of issuer at the end of IPO year (annual Compustat item 60) divided by 

CRSP end of year number of shares outstanding; EPS is income before extraordinary items available to 

common shareholders (annual Compustat item 237) divided by CRSP number of shares outstanding; r is 

the required rate of return on firm’s equity. We assume a constant required rate of return r of 13%. TV, 

the terminal value is calculated as follows: 

( EPS − r * B ) + ( EPS − r * B ) 

2 

1 

3 

2 1 

TV = * 

(5) 

2 

2 

( 1 + r) 

* ( r − g) 

The terminal value is calculated as an average to avoid the effect of unusual performance in year 3. 

Constant earnings growth g (5% and 0% are considered) is assumed after year 3 and the terminal value of 

18 

If earnings are missing or negative for the matching firm (in the case of earnings based valuation), the closest Compustat firm 

with no missing data is used as the matching firm.

the stock is calculated as a perpetuity. If the terminal value is negative, we set it equal to zero, since 

managers are unlikely to continue negative NPV projects forever. 

8.2 Univariate Analysis 

Table 7a reports the relationships between the IPO firms’ valuation at the offer price (OP), the first 

trading day secondary market price (SMP), and the estimated intrinsic value ratio (IV) across various sub- 

samples of IPOs. Panel A presents median underpricing (SMP/OP), Panel B – median offer price to 

intrinsic value ratio (O/IV), and Panel C – median secondary market price to intrinsic value ratio 

(SMP/IV). The size of the sample changes for the valuations using different price multiples due to 

unavailability of data on the balance-sheet variables for the IPO companies. 

Our results show that regardless of the methodology used to compute the intrinsic value for IPO 

firms, both OP/IV and SMP/IV ratios are significantly higher for CVC backed firms than for IVC backed 

firms. Median CVC backed IPO is valued higher than median IVC backed IPO by 40 to 216 percentage 

points at the offer price and by 50 to 300 percentage points at the first day secondary market price. These 

differences are statistically significant at the 1% level. 

8.3 Multivariate Analysis 

In addition to the above univariate analysis, we also implement a multivariate regression analysis of 

IPO valuation both at the offer price and at the first trading day secondary market price to investigate the 

combined influence of corporate venture capitalists, independent venture capitalists, and various other 

market participants on the valuation of IPOs. Table 7b reports the results of this analysis. The dependent 

variable is the log of the OP/IV ratio. To analyze the influence of CVC backing on the valuation of IPO 

companies, we consider four independent variables reflecting the degree of CVC participation in the 

entrepreneurial firm: CVC backing dummy, number of CVCs, CVC share of total VC investment, and the 

number of CVCs’ corporate parents in the same 2 digit SIC code with that of an IPO firm. These variables 

are set to zero for IPO firms backed by IVCs alone. The set of independent variables also includes the 

30

IVC backing dummy, and the reputation of existing IVCs, and measures of participation by various other 

market players.. As control variables we employ size (log of total assets), share of firm equity sold in the 

IPO, various operating performance characteristics of IPO firms, industry dummies, and year dummies. 

We find that the presence of CVC backing an IPO firm increases the valuation of this firm at the 

offer price (relative to an industry peer) by 35% on average. Similarly, each additional CVC backing the 

entrepreneurial firm going public causes on average 13% increase in valuation. Finally, the backing by an 

additional CVC with its corporate parent in the same Fama-French industry as the IPO firm increases this 

firms’ valuation by roughly 11%. 

Our univariate and multivariate analysis of IPO firms’ valuation at both offer price and the secondary 

market price suggest that corporate venture capitalists are able to credibly convey the information about 

future prospect of the IPO firms backed by them to both IPO and secondary market participants. Further, 

the higher valuation assigned by the IPO market to CVC backed firms may reflects the higher value of 

their growth options relative to that of IVCs backed IPO firms. 

8.4 Long-Run Post-IPO Stock Returns of CVC Backed and IVC Backed Firms 

The higher valuation awarded to CVC backed firms relative to IVC backed firms at the IPO and 

secondary market may arise from temporary misvaluation in the equity market rather than from the 

superior ability of CVCs to communicate the true value of firms backed by them to various equity market 

participants. In the former scenario, however, one would expect CVC backed firms to underperform IVC 

backed firms in terms of long-run stock returns, as the temporary misevaluations are corrected over time. 

We therefore compare the five year stock return performance of CVC backed and IVC backed firms to 

rule out the misvaluation scenario. 

We compare the intercepts of the Fama and French (1993) three-factor model based on the calendar- 

time monthly portfolio returns of CVC backed and IVC backed IPO firms. We construct the calendar- 

time portfolio returns by averaging monthly returns of firms that went public within 60 month of the 

return date. Table 8 present the results of our analysis. Following earlier stock return studies, along with 

31

the portfolios of CVC backed firms and IVC backed firms we consider a hedge portfolio consisting of a 

long position in CVC backed IPOs and a short position in IVC backed IPOs (CVC-IVC portfolio). 

Similarly we construct “LCVC-HCVC” portfolio that corresponds to a long position in low-CVC- 

investment firms and a short position in high-CVC-investment firms. Panel A presents the OLS 

coefficient estimates for equal-weighted portfolios of IPO firms. Panel B presents the coefficient 

estimates from the WLS regression for the value-weighted portfolios of IPO firms. 

The results are qualitatively and quantitatively similar across panels. We find that over the five-year 

horizon post IPO CVC backed firms outperform IVC backed firms by 1.1 percentage point on a monthly 

basis. This translates into 13.2% better stock performance annually. We find no evidence that the sub-set 

of IPOs with larger investment by corporate venture capitalists experience significantly higher/lower 

stock return performance within six years post-IPO. 

Overall, our evidence supports the idea that the higher valuation we documented earlier for CVC- 

backed firms is not the result of a temporary overvaluation of these firms at the time of IPO. Rather, our 

evidence indicates that CVCs are able to better convey the true value of firms backed by them to various 

participants in the equity market. 

9. Conclusion 

In this paper we have analyzed how corporate venture capitalists (CVCs) create value for 

entrepreneurial firms backed by them and how value creation by CVCs differs from that of independent 

venture capitalists (IVCs). Making use of a large data set consisting of a sample of CVC-backed and IVC- 

backed firms (starting from their first round of investment in an entrepreneurial firm and going well into 

the post-IPO market), we explored three related research questions: First, do CVCs exploit their 

knowledge and industry expertise when choosing portfolio firms, and invest in significantly different 

kinds of firms compared to independent venture capitalists (IVCs)? Second, do they succeed in creating 

greater product market value subsequent to investment compared to IVCs? Finally, do they allow 

portfolio firms to access the equity market more efficiently? 

32

Our findings can be summarized as follows. First, compared to IVCs, CVCs invest in smaller, 

younger, more R&D intensive firms, and in earlier rounds; CVC portfolio firms are typically in industries 

related to their corporate parents. Second, CVCs invest significantly larger amounts while getting smaller 

equity fractions in return compared to IVCs. Third, even though CVC backed firms have a higher 

probability of a successful exit (IPO or acquisition), they exhibit significantly lower post-IPO operating 

performance compared to IVC backed firms, and are more likely to be de-listed in the years immediately 

after IPO. However, CVC backed firms are characterized by greater growth rates in the post-IPO period 

than IVC-backed firms. Fourth, CVC-backed firms enjoy greater analyst coverage, higher reputation IPO 

underwriters, and larger post-IPO institutional investor holdings: even the reputation of the IVCs co- 

investing in CVC backed firms is no less than that of IVCs investing in firms backed by IVCs alone. 

Finally, CVC-backed firms have higher IPO market valuations and long-term post-IPO stock returns 

compared to IVC backed firms. 

Overall, our results indicate that CVCs uniquely create value in two different ways: First, by 

investing in earlier stage firms involving pioneering technologies which may not otherwise be able to 

obtain private equity funding. Second, by giving CVC backed firms more efficient access to the equity 

market by credibly communicating the true value of firms backed by them to three different 

constituencies: first, to IVCs, prompting them to co-invest in these firms pre-IPO; second, to various 

financial market players such as underwriters, institutional investors, and analysts, allowing them to 

access the equity market at an earlier stage in their life-cycle compared to firms backed by IVCs alone; 

and third, directly to IPO market investors, allowing CVC-backed firms to obtain higher IPO market 

valuations compared to the valuation of firms backed by IVCs alone. 

33

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34

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Paper. 

35

Table 1 

Summary Statistics for Venture Capital Financing Rounds 

This table reports the descriptive statistics for the sample of individual investments by various venture capitalists from 1980 to 2004. Panel A presents the characteristics of CVC investments in 

entrepreneurial firms with at least one CVC investors (CVC backed firms). Panel B presents the characteristics of IVC investments in CVC backed entrepreneurial firms. Panel C presents IVC 

investments in entrepreneurial firms backed by IVCs alone (non-CVC backed firms). The main data source is VentureExpert database of SDC Platinum. The data was cross-references with other data 

sources (e.g., Jay Ritter data on firm age, SDC Platinum IPO list, D&B dataset, and CorpTech Explore database). 

Panel A: CVC Round 

Investments in CVC 

Backed Companies 

Num of 

Obs Mean St Dev. 

40 

Panel B: IVC Round 

Investments in CVC 


Panel C: IVC Round 

Investments in non-CVC 


Num of 

Obs Mean St Dev. Num of Obs Mean St Dev. 

Firm Age at Round Date 6882 8.61 10.64 43077 14.21 14.16 105044 13.33 11.96 

Round Number (Sequence) 7180 2.36 2.24 45122 3.93 2.67 110663 3.12 2.44 

Round Number of Investors 7180 6.25 4.37 45122 7.19 4.96 110663 4.55 3.69 

VC Investment This Round ($ mil.) 6767 3.59 8.77 43404 2.12 4.53 103516 2.04 9.43 

VC Investment This Round Relative to Total Round Amount (%) 6740 29.17 28.38 43149 23.85 25.86 102794 39.56 34.32 

Total Round Amount ($ mil.) 6866 18.37 26.22 43816 14.17 20.63 104180 8.04 23.44 

VC Investment This Round Relative to Total VC Investment (%) 6754 10.56 15.22 43383 4.81 7.32 103374 14.25 22.21 

Company Post Round Valuation ($ mil) 3158 124.14 186.47 18801 96.60 141.32 29030 55.14 110.44 

Firm Investment This Round Relative to Post Round Valuation (%) 3104 6.34 18.62 18524 6.25 9.36 28492 12.44 420.31 

Reputation of Existing IVCs: 

Age 7180 12.88 7.19 45122 13.73 6.65 110662 13.22 8.03 

Fund Raised Over Past 5 Years ($ mil) 6886 431.39 658.86 44539 474.29 585.45 106054 372.09 672.82 

Fund Raised Since 1965 ($ mil) 6957 533.47 841.21 44759 592.35 734.62 107498 492.55 939.55 

Number of Rounds Participated Since 1965 7180 400.95 454.98 45122 435.68 464.30 110663 396.93 555.48 

Total Amount Invested Since 1965 ($ mil) 7179 530.45 771.72 45122 590.46 766.71 110654 536.92 979.95

Table 2a 

Patterns of Corporate Venture Capital Investments: 

Effect of Firm and Industry Characteristics 

This table reports the results of the probit analysis that explores corporate venture capitalists investment patterns. The dataset contain round by 

round investments by CVCs and IVCs from 1980 to 2004. The dependant variable is equal to 1 for first CVC-firm round of financing, and it is 

equal to 0 for all IVC rounds that occur prior to CVC entrance (post CVC entrance rounds are excluded from consideration). The independent 

variables are (i) entrepreneurial firm characteristics; (ii) entrepreneurial firm industry characteristics; (iii) reputation of the existing IVCs at the 

financing round; and (iv) other control variables. The main data source is VentureExpert database of SDC Platinum. The data was crossreferences 

with other data sources (e.g., Jay Ritter data on firm age, SDC Platinum IPO list, D&B dataset, and CorpTech Explore database). The 

t-statistics are reported in parentheses. ***, **, and * indicate significance of t-statistics at the 1, 5, and 10 percent levels, respectively. 

Panel A: 2 Digit SIC Industry Definition Panel B: Fama-French Industry Definition 

(1) (2) (3) (4) (5) (6) (7) (8) 

Firm Characteristics 

Firm Age at Round Date -0.0136 -0.0148 -0.0145 -0.0136 -0.0159 -0.0171 -0.0168 -0.0159 

(5.10)*** (5.58)*** (5.50)*** (5.10)*** (4.97)*** (5.22)*** (5.17)*** (4.93)*** 

Round Number -0.0332 -0.0367 -0.0377 -0.0336 -0.0336 -0.0362 -0.0369 -0.0335 

(3.03)*** (3.38)*** (3.48)*** (3.06)*** (3.52)*** (3.83)*** (3.92)*** (3.51)*** 

Log Dollar Amount Invested 0.2941 0.2840 0.2881 0.2936 0.3009 0.2934 0.2977 0.3015 

This Round 

(21.50)*** (21.62)*** (21.51)*** (21.48)*** (23.86)*** (24.07)*** (24.04)*** (23.90)*** 

Log Total Prior Investment -0.0094 -0.0090 -0.0087 -0.0093 -0.0107 -0.0107 -0.0102 -0.0108 

Average Industry Characteristics 

(1.93)* (1.87)* (1.80)* (1.90)* (2.59)*** (2.59)*** (2.47)** (2.60)*** 

Capital Expenditures 1.3682 1.5402 1.7033 1.3111 1.9497 2.0667 2.1261 1.9823 

(1.57) (1.83)* (2.03)** (1.50) (3.43)*** (3.75)*** (3.86)*** (3.47)*** 

R&D 0.0397 0.0396 0.0394 0.0378 0.0337 0.0340 0.0335 0.0353 

(2.97)*** (2.97)*** (2.96)*** (2.81)*** (3.83)*** (3.88)*** (3.82)*** (3.99)*** 

Sales Growth Over Past 3 0.0034 0.0052 0.0033 0.0034 0.2761 0.2544 0.2297 0.2643 

Years (0.37) (0.50) (0.24) (0.39) (3.28)*** (3.04)*** (2.72)*** (3.12)*** 

Return on Industry Portfolio 0.0141 0.0020 0.0020 0.0151 0.0448 0.0271 0.0195 0.0440 

Over Prior 6 Month (0.28) (0.04) (0.04) (0.30) (1.20) (0.72) (0.52) (1.18) 

Beta 0.0632 0.0702 0.0708 0.0648 0.0533 0.0574 0.0583 0.0540 

(3.24)*** (3.62)*** (3.65)*** (3.32)*** (2.99)*** (3.24)*** (3.29)*** (3.06)*** 

Herfindahl Index -0.4188 -0.4457 -0.4076 -0.6936 -0.6804 -0.6273 

(1.97)** (2.11)** (1.96)* (2.20)** (2.18)** (1.99)** 

Largest Market Share (Sales) -0.3871 -0.3897 

(2.29)** (2.46)** 

Average Reputation of Existing IVCs 

IVCs Age -0.0193 -0.0194 -0.0164 -0.0165 

(6.73)*** (6.75)*** (7.18)*** (7.22)*** 

Total Number of Rounds 

-0.0002 -0.0002 

Invested 

(5.03)*** (6.70)*** 

Total Amount Invested 

($mil.) 

-0.0001 -0.0001 

(5.03)*** (6.67)*** 

Internet Company Dummy 0.0895 0.1066 0.1053 0.0873 0.1392 0.1496 0.1474 0.1326 

(2.23)** (2.65)*** (2.60)*** (2.17)** (4.51)*** (4.84)*** (4.75)*** (4.39)*** 

Startup/Seed Stage at First 

Round of VC Financing 

Early Stage at First Round of 

VC Financing 

Expansion Stage at First 


Later Stage at First Round of 

VC Financing 

0.2332 0.2441 0.2351 0.2336 0.2499 0.2585 0.2466 0.2472 

(3.14)*** (3.30)*** (3.19)*** (3.14)*** (3.90)*** (4.04)*** (3.87)*** (3.86)*** 

0.3985 0.4081 0.3936 0.3971 0.3407 0.3541 0.3356 0.3394 

(5.28)*** (5.42)*** (5.25)*** (5.26)*** (4.85)*** (5.04)*** (4.79)*** (4.83)*** 

0.2462 0.2616 0.2545 0.2461 0.2142 0.2314 0.2196 0.2122 

(3.53)*** (3.76)*** (3.67)*** (3.53)*** (3.39)*** (3.66)*** (3.49)*** (3.36)*** 

0.2377 0.2485 0.2428 0.2384 0.2252 0.2375 0.2289 0.2228 

(3.64)*** (3.83)*** (3.76)*** (3.66)*** (3.88)*** (4.10)*** (3.97)*** (3.84)*** 

Log Likelyhood 3503 3523 3524 3502 5005 5022 5023 5005 

Pseudo R 2 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 

Observations 19370 19370 19370 19370 26359 26358 26358 26359 

40

Table 2b 

Patterns of Corporate Venture Capital Investments: 

Effect of Match Between CVC and Entrepreneurial Firm 

This table reports the results of the probit analysis that explores corporate venture capitalists investment patterns. The dataset contain round by 

round investments by CVCs and IVCs from 1980 to 2004 where each CVC investment is uniquely paired with entrepreneurial firm. The 

dependant variable is equal to 1 if a CVC invested into a company, and it is equal to 0 id CVC did not invest into a company but it received an 

IVC investment (only companies that received round financing within 1 month of CVC investment date are considered). The independent 

variables are (i) industry match between CVC and entrepreneurial company (dummies for same SIC code or Fama-French industry); (ii) CVC 

familiarity with existing IVC investors; (iii) reputation of the existing IVCs at the financing round; and (iv) other control variables. The t-statistics 

are reported in parentheses. ***, **, and * indicate significance of t-statistics at the 1, 5, and 10 percent levels, respectively. 

(1) 

CVC and Company Industry Relationship 

(2) (3) (4) (5) (6) (7) 

4 digit SIC 0.1027 0.0862 0.0912 0.0906 0.1028 0.1032 

(3.45)*** (2.71)*** (3.08)*** (3.08)*** (3.45)*** (3.47)*** 

3 digit SIC 0.0449 0.0403 0.0494 0.0523 0.0444 0.0441 

(1.29) (1.15) (1.44) (1.53) (1.28) (1.26) 

2 digit SIC 0.1540 0.1615 0.1516 0.1480 0.1557 0.1547 

(3.91)*** (4.33)*** (3.95)*** (3.89)*** (3.99)*** (3.94)*** 

CVC and Company Industry 

0.1304 

Relationship FF Industry 

IVCs – CVCs Relationship 

(4.97)*** 

Sum of Existing VCs and CVC -0.0001 -0.0001 -0.0001 -0.0001 -0.0001 

Relationship Years 

(3.21)*** (3.83)*** (1.87)* (1.59) (2.78)*** 

Sum of Existing VCs and CVC 

Co-Investments (# of Firms) 

Sum of Existing VCs and CVC 

Co-Investments (# of Rounds) 

41 

-0.0001 

(4.03)*** 

-0.0003 

(3.74)*** 

Reputation of Existing IVCs 

Avg Age of Existing VCs -0.0123 -0.0123 -0.0124 -0.0119 

(6.85)*** (6.79)*** (6.92)*** (6.71)*** 

Avg Funds Raised by Existing 

-0.1125 

VCs since 1965 ($ mil.) 

(4.46)*** 

Avg Rounds Invested by 

-0.0002 

Existing VCs since 1965 

(7.59)*** 

Avg Amount Invested by 

-0.0011 

Existing VCs since 1965 ($ mil.) 

Firm Characteristics 

(6.27)*** 

Firm Age at Round Date -0.0094 -0.0115 -0.0113 -0.0112 -0.0095 -0.0094 -0.0087 

(4.32)*** (4.54)*** (5.01)*** (4.95)*** (4.31)*** (4.31)*** (4.20)*** 

Internet Dummy -0.1820 -0.1749 -0.1721 -0.1698 -0.1806 -0.1811 -0.1588 

(6.69)*** (6.98)*** (6.41)*** (6.44)*** (6.58)*** (6.59)*** (5.63)*** 

Round number -0.0026 -0.0055 -0.0063 -0.0075 -0.0029 -0.0030 -0.0030 

(0.45) (0.88) (1.09) (1.29) (0.48) (0.51) (0.52) 

Prior Investment Dummy -0.1727 -0.1722 -0.1795 -0.1770 -0.1735 -0.1736 -0.1696 

(6.49)*** (5.71)*** (6.64)*** (6.55)*** (6.55)*** (6.57)*** (6.33)*** 

Log (Round Amount, $) 0.1031 0.1124 0.1018 0.1085 0.1042 0.1038 0.1004 

(15.08)*** (12.09)*** (14.35)*** (13.59)*** (16.04)*** (15.99)*** (14.93)*** 

Other Control Variables 

6 month Prior Return in -0.0001 -0.0001 -0.0001 -0.0001 -0.0001 -0.0001 -0.0001 

Company Industry (2SIC/FF) (1.78)* (1.59) (1.57) (1.70)* (1.77)* (1.76)* (12.78)*** 

Startup/Seed Stage at First -0.3256 -0.0547 -0.3061 -0.3079 -0.3291 -0.3284 -0.3277 

Round of VC Financing (2.02)** (0.26) (1.92)* (1.93)* (2.04)** (2.04)** (2.10)** 

Early Stage at First Round of -0.2540 0.0167 -0.2233 -0.2372 -0.2558 -0.2557 -0.2578 

VC Financing 

(1.56) (0.08) (1.39) (1.48) (1.57) (1.57) (1.64) 

Expansion Stage at First Round -0.4585 -0.1980 -0.4257 -0.4294 -0.4610 -0.4607 -0.4678 

of VC Financing 

(2.84)*** (0.95) (2.67)*** (2.69)*** (2.86)*** (2.85)*** (3.00)*** 

Later Stage at First Round of -0.4038 -0.1354 -0.3839 -0.3838 -0.4063 -0.4058 -0.4103 

VC Financing 

(2.54)** (0.64) (2.44)** (2.44)** (2.56)** (2.55)** (2.67)*** 

Company Related 

Dummies (2SIC/FF) 

Industry 

+ + + + + + + 

Observations 2,003,060 1,830,481 2,003,091 2,003,091 2,003,060 2,003,060 2,003,083 

Pseudo R2 0.1349 0.1479 0.1367 0.1378 0.1352 0.1351 0.1302 

Log Likelyhood 18,863 17,492 18,824 18,799 18,856 18,859 18,966

Table 3 

Amount Invested and Pricing of Financing Rounds 

This table reports the table reports the results of the regression analysis of venture capital financing round terms. The dataset contain round by 

round investments by CVCs and IVCs from 1980 to 2004. Panel A presents the analysis of the amount invested by IVCs and CVCs each 

financing round. The dependant variable is log of dollar amount invested by venture capitalists. The unit of observation is firm-round-venture 

capitalist. Panel B analyzes the share of the entrepreneurial company transferred to venture capitalists for each $1mil. invested. The unit of 

observation is firm-rounds. Round of financing is considered to be CVC backed if there is at least one CVC investor in this round. The main data 

source is VentureExpert database of SDC Platinum. The data was cross-references with other data sources (e.g., Jay Ritter data on firm age, SDC 

Platinum IPO list, D&B dataset, and CorpTech Explore database). The t-statistics are reported in parentheses. ***, **, and * indicate significance 

of t-statistics at the 1, 5, and 10 percent levels, respectively. 

Panel A: Log Dollar Amount Panel B: Firm’s Share Transferred to 

Invested by VCs Each Round VCs for $1mil. Investment Each Round 

(1) (2) (3) (4) (5) (6) 

CVC Backing Dummy 0.475 0.384 0.382 -0.041 -0.041 -0.041 

(21.73)*** (10.06)*** (11.22)*** (3.94)*** (3.61)*** (3.76)*** 

CVC Industry Match 

0.284 0.172 0.256 

(Fama-French Industry) 

(7.54)*** (2.64)*** (4.39)*** 

Firm Age at Round Date -0.004 -0.003 -0.004 -0.003 -0.003 -0.003 

(3.56)*** (2.49)** (3.91)*** (2.95)*** (2.71)*** (2.76)*** 

Internet Dummy 0.080 0.063 0.083 -0.016 -0.012 -0.014 

(7.71)*** (5.46)*** (7.34)*** (1.56) (1.17) (1.33) 

Round Number -0.098 -0.120 -0.119 -0.010 -0.010 -0.010 

(47.74)*** (49.47)*** (52.75)*** (3.00)*** (2.45)** (2.60)*** 

Prior CVC Rounds Dummy -0.138 -0.175 -0.090 0.010 0.009 0.010 


(7.38)*** (5.46)*** (3.31)*** (1.69)* (1.64) (1.78)* 

Age 0.006 0.001 

(16.43)*** (2.81)*** 

5-year Funds Raised ($mil.) 0.002 0.007 

(43.54)*** (0.91) 

Total Funds Raised ($mil.) 0.003 0.006 

(36.20)*** (1.75)* 

Startup/Seed Stage at First Round of VC -0.125 -0.122 -0.118 -0.186 -0.194 -0.191 

Financing 

(6.44)*** (5.57)*** (5.56)*** (3.03)*** (3.03)*** (3.04)*** 

Early Stage at First Round of VC 0.001 0.006 0.013 0.020 -0.008 -0.002 

Financing 

(0.05) (0.35) (0.73) (0.20) (0.07) (0.02) 

Expansion Stage at First Round of VC 0.140 0.128 0.123 -0.158 -0.174 -0.170 

Financing 

(9.92)*** (8.10)*** (8.07)*** (2.25)** (2.35)** (2.35)** 

Later Stage at First Round of VC 

0.150 0.135 0.136 -0.186 -0.198 -0.194 

Financing 

(9.77)*** (7.82)*** (8.12)*** (2.86)*** (2.90)*** (2.91)*** 

Year and Industry Dummies + + + + + + 

Observations 94,593 67,174 72,298 12,769 11,534 11,799 

R-squared 0.30 0.33 0.33 0.04 0.04 0.04 

42

Table 4a 

Exit Strategies for CVC Backed and IVC Backed Firms: 

Univariate Analysis 

This table reports the descriptive statistics for the success rates and exit strategies of entrepreneurial firms with venture capital backing from 1980 to 2004. Panel A presents the characteristics of firms 

that went public; Panel B looks at the acquired firms; Panel C presents the characteristics of firms that were written-off by venture capitalists; and Panel D presents active investments. An 

entrepreneurial firm is considered to be CVC backed if it has at least one CVC investor, and IVC backed if it enjoyed only IVC investments. The main data source is VentureExpert database of SDC 

Platinum. The data was cross-references with other data sources (e.g., Jay Ritter data on firm age, SDC Platinum IPO list, D&B dataset, and CorpTech Explore database). ***, **, and * indicate 

significance of t-statistics for the test of difference in means between two samples at the 1, 5, and 10 percent levels, respectively. 

Panel A: IPO Firms Panel B: Acquired Firms Panel C: Writeoffs Panel D: Active investments 

CVC IVC Difference CVC IVC Difference CVC IVC Difference CVC IVC Difference 

Number of Portfolio Firms 590 2585 328 1620 721 3462 1587 11740 

Share of Portfolio Firms 18.289 13.32 4.969*** 10.1674 8.3475 1.820*** 22.3497 17.839 4.511*** 49.194 60.494 -11.30*** 

Round Number of CVC Entrance 3.068 2.427 2.632 2.357 

Firm’s Age at CVC Entrance Date 4.323 2.490 3.685 3.719 

CVC Amount Invested ($mil.) 10.364 6.931 5.583 5.822 

CVCs Share in All VC Investments (%) 21.656 22.151 19.386 22.197 

Number of CVC Investors 1.517 1.360 1.408 1.332 

Number of CVC Investors in the Same Industry 

2 digit SIC 0.853 0.571 0.621 0.645 

3 digit SIC 0.691 0.405 0.443 0.514 

4 digit SIC 0.379 0.119 0.152 0.192 

Fama-French industry 0.842 0.602 0.629 0.693 

Year From First Investment to Exit 4.235 4.128 0.108 2.947 2.776 0.172 4.401 3.963 0.438*** 6.821 8.321 -1.501*** 

Firm Age at Exit Date 5.902 9.839 -3.938*** 4.959 7.387 -2.427*** 6.654 9.231 -2.576*** 5.455 7.069 -1.614*** 

Percentage of Internet Companies 42.881 19.072 23.810*** 66.159 39.877 26.282*** 52.705 27.499 25.206*** 55.829 31.797 24.031*** 

Total Number of VC Invetsors 20.949 9.146 11.803*** 16.058 6.945 9.113*** 18.132 8.322 9.810*** 14.744 5.608 9.135*** 

Total Number of Rounds 5.195 3.304 1.891*** 3.957 2.691 1.266*** 4.433 3.090 1.343*** 3.945 2.453 1.493*** 

Total Amount Invested by All VCs ($mil.) 56.352 31.476 24.876*** 45.196 19.274 25.922*** 38.367 18.171 20.197*** 40.678 14.100 26.579*** 


Age 14.421 14.663 -0.242 13.836 15.246 -1.411*** 14.427 14.729 -0.302 13.379 13.416 -0.037 

Total Amount Invested Since 1965 ($mil.) 451.131 425.802 25.329* 906.988 692.629 214.359** 859.048 627.278 231.771** 989.780 734.091 255.688** 

Number of Financed Rounds 383.386 337.095 46.291* 563.809 488.062 75.747* 534.652 430.046 104.606** 594.415 465.823 128.593*** 

Funds Raised Over 5 Years ($mil.) 420.230 392.855 27.375* 690.291 531.699 158.592** 652.828 491.966 160.862*** 630.473 494.915 135.558** 

Funds Raised Since 1965 ($mil.) 600.385 564.085 36.300 831.413 624.995 206.418** 808.808 620.453 188.355** 739.198 604.497 134.701** 

40

Table 4b 

Exit Strategies for CVC Backed and IVC Backed Firms: 

Multivariate Analysis 

This table reports the multivariate analysis of the success rates and exit strategies of entrepreneurial firms with venture capital backing from 1980 to 2004. Panel A presents probit analysis of propensity 

of an entrepreneurial firm for successful exit (IPO or Acquisition). The dependant variable is 1 for entrepreneurial firms that went public or were acquired and 0 if the VC investment was written off. 

Panel B presents probit analysis of propensity of an entrepreneurial firm to have IPO vs Acquisition. The dependant variable is 1 for entrepreneurial firms that went public and 0 for acquired firms. 

Panel C presents the regression analysis of the number of years from first VC investment till successful exit (IPO or Acquisition). An entrepreneurial firm is considered to be CVC backed if it has at 

least one CVC investor, and IVC backed if it enjoyed only IVC investments. The t-statistics are reported in parentheses. ***, **, and * indicate significance of t-statistics for the test of difference in 

means between two samples at the 1, 5, and 10 percent levels, respectively. 

Panel A: Propensity for Successful Exit Panel B: Propensity to Have IPO vs. Acquisition Panel C: Time From First VC Investment to Exit 

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 

IPO/ Acquisition Dummy -0.681 -0.687 -0.689 -0.684 

(5.77)*** (5.82)*** (5.83)*** (5.80)*** 

CVC Backing Dummy 0.011 -0.065 0.714 

(0.14) (0.85) (4.09)*** 

CVC Share of Total VC 

0.285 0.510 -0.392 

Investment 

(1.46) (2.39)** (1.92)* 

CVC Originated 

0.061 -0.099 0.102 

Investment Dummy 

(0.63) (0.95) (0.43) 

Number of CVC -0.006 -0.024 0.555 

(0.10) (0.41) (4.13)*** 

CVC-Firm Industry Match -0.008 -0.041 -0.013 0.004 0.057 -0.039 0.040 0.051 -0.269 -0.111 -0.048 -0.543 

(0.09) (0.55) (0.17) (0.04) (0.88) (0.67) (0.72) (0.62) (2.83)*** (2.45)*** (2.52)*** (2.88)*** 

Log(Total Amount 0.222 0.222 0.222 0.222 0.089 0.088 0.087 0.088 0.205 0.226 0.226 0.207 

Invested by VCs) 

(17.63)*** (17.82)*** (17.81)*** (17.63)*** (6.24)*** (6.24)*** (6.24)*** (6.20)*** (4.93)*** (5.53)*** (5.54)*** (5.03)*** 

Company Age at First 

Investment Date 

0.011 0.011 0.011 0.011 -0.011 -0.011 -0.011 -0.011 0.078 0.076 0.077 0.078 

(4.60)*** (4.62)*** (4.60)*** (4.60)*** (4.53)*** (4.44)*** (4.50)*** (4.51)*** (8.70)*** (8.54)*** (8.55)*** (8.66)*** 

Internet Dummy 0.654 0.652 0.655 0.654 0.298 0.287 0.294 0.296 -1.050 -1.005 -1.012 -1.060 

(8.37)*** (8.36)*** (8.39)*** (8.36)*** (4.46)*** (4.30)*** (4.42)*** (4.44)*** (6.91)*** (6.60)*** (6.68)*** (6.96)*** 

Avg Age of Existing IVCs 0.012 0.013 0.012 0.012 0.002 0.003 0.002 0.002 0.037 0.035 0.036 0.036 

(4.33)*** (4.39)*** (4.35)*** (4.33)*** (1.00) (1.20) (0.97) (1.02) (4.50)*** (4.40)*** (4.44)*** (4.53)*** 

6-month EW Return of FF 

Industry Portfolio 

Startup/Seed Stage at First 


Early Stage at First Round 


Expansion Stage at First 


Later Stage at First Round 


0.767 0.764 0.767 0.768 0.783 0.779 0.782 0.782 -0.912 -0.884 -0.890 -0.907 

(7.99)*** (7.96)*** (7.99)*** (8.00)*** (7.38)*** (7.35)*** (7.37)*** (7.37)*** (3.81)*** (3.70)*** (3.72)*** (3.80)*** 

-0.506 -0.508 -0.508 -0.505 -0.739 -0.748 -0.736 -0.740 0.481 0.499 0.492 0.489 

(7.58)*** (7.60)*** (7.59)*** (7.57)*** (8.58)*** (8.69)*** (8.55)*** (8.59)*** (2.34)** (2.44)** (2.40)** (2.39)** 

-0.455 -0.456 -0.456 -0.455 -0.617 -0.629 -0.616 -0.619 0.215 0.250 0.240 0.235 

(7.55)*** (7.56)*** (7.56)*** (7.55)*** (8.35)*** (8.48)*** (8.33)*** (8.38)*** (1.23) (1.42) (1.36) (1.34) 

-0.275 -0.273 -0.275 -0.275 -0.510 -0.512 -0.510 -0.511 0.502 0.514 0.513 0.504 

(5.24)*** (5.20)*** (5.23)*** (5.24)*** (8.77)*** (8.81)*** (8.77)*** (8.78)*** (3.49)*** (3.57)*** (3.56)*** (3.51)*** 

-0.030 -0.029 -0.030 -0.029 -0.363 -0.371 -0.365 -0.365 0.629 0.667 0.662 0.635 

(0.42) (0.41) (0.42) (0.42) (5.06)*** (5.17)*** (5.09)*** (5.09)*** (3.47)*** (3.67)*** (3.64)*** (3.51)*** 

Observations 5645 5645 5645 5645 3714 3714 3714 3714 3648 3648 3648 3648 

R-squared - - - - - - - - 0.13 0.13 0.13 0.13 

40

Table 5a 

Post IPO Operating of CVC Backed and IVC Backed Firms 

This table reports median profitability measures, sales growth rates, and other measures of operating performance for 5 years after the IPO date. 

Compustat data items for these ratios are: Profit Margin (Net Income (172)/Sales (12)), EBITDA (13)/Total Assets (6), EBITDA (13)/Sales (12), 

Return on Assets (Net Income (172)/Total Assets (6)), CE/Total Assets (Capital expenditure (128)/ Total Assets (6)), and R&D/Total Assets 

(R&D Expense (46) / Total Assets (6)). “CVC” stands for IPO firms with at least one CVC investor. “IVC” represents IPO firms backed by IVCs 

alone. “HCVC” stands for IPO firms where the CVCs’ share in total VC investment is above 20% while “LCVC” stands for the IPO firms with 

small financial presence of CVCs (below 15%).Panel A presents statistics for the full sub-samples of IPOs. “Diff” in Panel A represents the 

differential in median between two sub-samples. Panel B presents performance differences where each CVC (HCVC) backed IPO is matched to 

IVC (LCVC) backed IPO firm. The matching company has to have closest total assets, and be within the same year and industry as defined by 

Fama and French (1997). “Diff” in Panel B represent the median of differences in performance characteristics for matched firms. ***, **, and * 

indicate significance at the 1, 5, and 10 percent levels, respectively, for Wilcoxon-Mann-Whitney rank sum test. 

Year 

CVC 

Panel A: Full IPO Sub-samples (%) 

IVC Diff. HCVC LCVC Diff. CVC 

Panel B: Matched IPO Sub-samples (%) 

IVC Diff. HCVC LCVC Diff. 

I. EBITDA/Total Assets 

0 -33.02 11.79 -44.81*** -34.95 -31.70 -3.25 -34.64 -3.97 -19.93*** -43.86 -40.47 -0.93 

1 -14.03 10.49 -24.52*** -14.16 -13.85 -0.31 -13.43 1.19 -8.50*** -15.81 -17.10 3.77 

2 -15.36 9.22 -24.59*** -17.61 -14.94 -2.66* -14.74 -1.60 -5.67*** -19.36 -16.52 -6.67 

3 -14.68 7.81 -22.49*** -19.48 -13.23 -6.25* -14.18 -1.90 -5.79*** -20.01 -13.21 -3.47* 

4 -8.12 7.83 -15.95*** -12.65 -5.56 -7.10** -7.86 1.33 -4.47*** -12.15 -8.00 -0.17 

5 -3.91 9.35 -13.25*** -6.99 -2.47 -4.52* -3.32 3.45 -0.91 -7.56 -5.04 -3.18 

II. Profit Margin 

0 -75.76 1.75 -77.51*** -63.05 -85.03 21.98 -81.42 -11.10 -23.17*** -74.29 -132.28 14.78* 

1 -70.80 3.64 -74.44*** -95.28 -65.54 -29.75* -68.44 -3.09 -14.31*** -87.09 -85.70 1.21 

2 -65.82 2.24 -68.06*** -87.91 -60.50 -27.40 -60.65 -10.45 -8.87*** -89.50 -57.42 19.31 

3 -62.07 0.94 -63.02*** -91.02 -53.24 -37.78** -55.11 -13.87 -10.39*** -67.37 -67.28 -2.97 

4 -30.79 0.58 -31.37*** -47.30 -20.09 -27.21** -29.09 -7.99 -7.19*** -54.09 -30.79 -12.86** 

5 -15.74 0.80 -16.54*** -22.48 -11.33 -11.16 -12.53 -5.80 -2.73 -19.45 -22.82 -7.84 

III. Sales Margin 

0 -67.17 8.46 -75.63*** -57.10 -74.93 17.84 -73.83 0.06 -26.86*** -73.34 -115.98 16.46* 

1 -62.47 10.26 -72.73*** -70.34 -61.59 -8.75 -61.22 4.30 -20.69*** -68.36 -69.59 9.60 

2 -46.53 9.26 -55.79*** -63.39 -42.78 -20.60 -42.46 -1.49 -8.76*** -61.51 -40.90 0.15 

3 -37.25 7.77 -45.02*** -62.78 -24.78 -38.00* -35.39 -2.10 -10.75*** -51.42 -35.49 -11.55* 

4 -15.33 7.36 -22.68*** -29.45 -6.67 -22.77** -14.31 1.68 -6.74*** -30.27 -13.55 -6.53 

5 -6.43 8.16 -14.59*** -15.18 -1.85 -13.32* 

IV. ROA 

-4.52 3.87 -0.39 -15.38 -8.61 -4.53 

0 -38.70 1.95 -40.65*** -40.97 -35.56 -5.41 -39.46 -15.55 -15.88*** -53.37 -45.15 -7.14 

1 -14.36 3.58 -17.93*** -13.98 -14.45 0.48* -13.79 -2.35 -4.68*** -18.30 -17.04 3.14 

2 -20.06 2.30 -22.36*** -20.34 -21.12 0.79 -19.03 -8.30 -4.61*** -22.69 -24.34 0.82 

3 -23.06 0.71 -23.78*** -23.92 -23.74 -0.18* -22.21 -9.96 -5.24*** -23.72 -25.79 0.71 

4 -14.88 0.58 -15.46*** -21.75 -9.65 -12.10** -14.64 -6.80 -3.91** -22.93 -10.04 -5.27* 

5 -9.88 0.95 -10.83*** -12.06 -7.65 -4.41 -8.09 -5.67 -2.98 -12.06 -10.69 -1.60 

V. CE in Total Assets 

0 6.83 6.47 0.36 7.69 6.69 1.00** 7.00 6.29 0.06 8.35 6.83 1.28* 

1 3.94 4.75 -0.80*** 3.85 4.14 -0.29 4.00 3.95 0.19* 3.69 4.31 -0.34 

2 4.86 5.88 -1.02*** 5.60 4.81 0.80 4.80 4.76 0.33** 5.58 4.82 0.58 

3 4.34 5.09 -0.74*** 4.23 4.17 0.06 4.35 4.07 0.85*** 5.17 4.17 0.23 

4 3.49 4.47 -0.98*** 3.59 3.44 0.15 3.58 3.39 0.32** 3.93 2.54 1.11** 

5 3.71 4.30 -0.59*** 3.35 3.91 -0.56 3.71 3.27 0.18** 3.82 3.33 0.14 

VI. R&D in Total Assets 

0 36.82 8.27 28.55*** 32.75 41.96 -9.22** 37.38 16.73 8.86*** 37.09 52.25 -9.00* 

1 30.51 7.43 23.08*** 30.51 33.73 -3.22 30.51 16.11 7.32*** 28.28 36.59 -3.15 

2 31.19 8.79 22.40*** 35.76 32.33 3.43 30.77 16.83 6.64*** 32.52 31.23 -3.40 

3 30.59 8.76 21.82*** 32.65 31.50 1.15 29.63 17.81 5.07*** 31.33 30.53 -2.34 

4 22.74 8.87 13.87*** 25.41 22.65 2.76 23.94 15.34 3.31*** 29.75 26.75 3.44 

5 21.25 7.55 13.70*** 24.61 20.95 3.66 21.06 16.78 4.54*** 26.24 26.12 0.69 

VII. Growth in Sales 

0 214.48 158.55 55.93*** 235.34 204.59 30.75 214.48 175.44 35.47** 239.50 227.55 17.87 

1 203.90 155.23 48.67*** 195.15 208.06 -12.91 203.47 172.37 21.01*** 203.47 260.97 -20.12** 

2 155.81 137.65 18.16*** 171.96 149.56 22.40 153.57 140.70 14.82*** 177.12 153.81 10.44 

3 118.89 124.73 -5.84** 110.64 121.93 -11.30* 117.58 121.30 -4.79 105.20 110.03 1.99 

4 120.67 117.20 3.47 116.29 123.72 -7.43* 118.87 116.45 4.30 116.29 113.59 0.48 

5 117.73 115.40 2.33 118.09 119.38 -1.28 116.06 108.52 7.73 118.29 119.86 -7.17 

40

Table 5b 

Probability of Delisting for CVC Backed and IVC Backed Firms 

This table reports share of IPO companies de-listed within 1 through 5 years in the post IPO period. Panel A reports the percentage of IPO 

companies delisted due to liquidation (delisting code DLSTCD between 400 and 499 or between 520 and 600). Panel B reports share of IPO 

companies delisted due to merge or acquisition (delisting code DLSTCD between 200 and 299). The delisting data are from CRSP. “CVC” stands 

for IPO firms with at least one CVC investor. “IVC” represents IPO firms backed by IVCs alone. “HCVC” stands for IPO firms where the CVCs’ 

share in total VC investment is above 20% while “LCVC” stands for the IPO firms with small financial presence of CVCs (below 15%). ***, **, 

and * indicate significance of reported t-statistics at the 1, 5, and 10 percent levels, respectively. 

Year CVC IVC Diff. T-stat HCVC LCVC Diff. T-stat 

Panel A: Share Delisting Due to Liquidation (%) 

1 0.22 0.18 0.04 0.15 0.00 0.41 -0.41 -0.80 

2 4.37 2.56 1.80*** 2.02 8.23 2.85 5.38*** 2.45 

3 6.99 4.94 2.04* 1.71 11.39 5.28 6.11*** 2.26 

4 9.83 7.44 2.38 1.66 15.82 7.72 8.10*** 2.56 

5 11.57 10.07 1.50 0.93 18.35 8.54 9.82*** 2.95 

Panel B: Share Delisting Due to Merger or Acquisition (%) 

1 1.97 1.77 0.20 0.28 0.63 2.85 -2.21 1.56 

2 9.61 7.50 2.10 1.47 6.33 10.98 -4.65 1.58 

3 15.72 14.34 1.38 0.74 12.03 17.48 -5.45 1.48 

4 20.74 19.71 1.04 0.49 18.99 21.14 -2.15 0.52 

5 24.02 25.32 -1.30 0.57 22.15 23.98 -1.83 0.42 

41

Table 6a 

Market Participants in CVC Backed and IVC Backed IPOs: 

Univariate Tests 

This table reports the cross-sectional distribution of underwriter reputation, institutional investor participation, analyst coverage, and venture 

capitalists reputation for IPOs from 1980 to 2004. Panel A presents the analysis of underwriter reputation according to the Carter-Manaster 

reputation measure updated by Loughran and Ritter (2002). It reports the percentage of IPOs with high-reputation underwriter (ranking of 8 or 

higher) and average underwriter reputation for each IPO sub-sample. Panel B presents institutional investor participation statistics. It reports the 

number of the institutional investors with IPO allocations, the institutional investor holdings as a percentage of shares sold in an IPO. Panel C 

reports the degree of analyst coverage. “CVC” stands for IPO firms with at least one CVC investor. “IVC” represents IPO firms backed by IVCs 

alone. “HCVC” stands for IPO firms where the CVCs’ share in total VC investment is above 20% while “LCVC” stands for the IPO firms with 

small financial presence of CVCs (below 15%). ***, **, and * indicate significance at the 1, 5, and 10 percent levels, respectively, for t-test of 

the equality of means of two sub-samples. The IPO and underwriter data are from SDC. The institutional investor holdings data are from 

Spectrum Institutional (13f) Holdings Database of Thomson Financial. The analyst forecast data are from the I/B/E/S database. The measures of 

venture capitalists reputation are computed based on Venture Expert data from SDC Platinum. 

Measure CVC IVC Diff. HCVC LCVC Diff. 

Panel A: Underwriter Reputation 

% of IPOs with Highly Reputable 

Underwriter 

82.10 67.91 14.19*** 79.75 84.15 -4.40 

Average Underwriter Reputation 8.02 7.45 0.56*** 7.91 8.06 -0.15 

Panel B: Institutional Investor Participation 

Number of Institutional Investors 

Participating in IPO 

26.87 19.21 7.66*** 27.50 26.85 0.65 

Institutional Investor Holdings as % 

of Shares Sold in IPO 

86.11 67.03 19.08*** 86.90 88.00 -1.10 

Panel C: Analyst Coverage 

Percentage of IPOs with Analyst 

Coverage 

93.7 86.1 7.6*** 88.1 95.1 -7.00*** 

Number of Analysts Following 5.77 4.08 1.69*** 6.06 5.64 0.43 

Panel D: Reputation of Existing IVCs 

VC Amount Invested Since 1965 452.59 479.07 -26.48 450.57 436.89 13.68 

VC Average Age 15.49 14.97 0.52 14.87 15.99 -1.12 

VC Funds Raised During 5 Years 

Prior to IPO 

435.55 379.22 56.33* 425.20 434.25 -9.05 

VC Rounds Invested 423.08 366.04 57.04** 425.02 415.80 9.22 

42

Table 6b 

Market Participants in CVC Backed and IVC Backed IPOs: Multivariate Tests 

This table reports the results of the regression analysis of various market participants in IPOs between 1980 and 2004. Panel A presents the analysis of underwriter reputation using Carter-Manaster 

reputation measure as dependant variable. Panel B presents the results with the institutional investor participation measured by the number of institutional investors with IPO holdings. Panel C reports 

the analyst coverage measured by the number of analysts following an IPO. The independent variables are the VC backing dummy, the CVC backing dummy, number of CVCs, CVC share of total 

amount invested by VCs, number of CVC in the same Fama French industry as the IPO firm (“CVC Industry Match”), underwriter reputation, number of analysts following the firm in the first year after 

the IPO, and the number of institutional investors participating in the IPO. The control variables are size (log of Total Assets), share of the firm sold in IPO, size of VC investment (log of total amount 

invested by all VCs), IPO firm operating performance characteristics prior to IPO, industry dummies, and year dummies. Robust t-statistics are reported in parentheses. ***, **, and * indicate 

significance at the 1, 5, and 10 percent levels, respectively. 

Panel A: Underwriter Reputation Panel B: Institutional Investor Participation Panel C: Analyst Coverage 

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 

VC Backing Dummy 0.326 0.325 0.321 0.324 -1.063 -1.018 -1.293 -1.044 0.487 0.500 0.417 0.502 

(2.54)** (2.53)** (2.49)** (2.52)** (1.00) (0.96) (1.22) (0.99) (2.01)** (2.07)** (1.80)* (2.08)** 

CVC Backing Dummy 0.206 3.370 0.961 

(2.82)*** (4.38)*** (4.09)*** 

Number of CVC 0.051 1.978 0.561 

(1.41) (4.82)*** (3.97)*** 


Investment 

0.080 9.040 2.785 

(2.31)*** (3.60)*** (2.30)** 

CVC Industry Match 0.058 2.415 0.999 

(1.09) (3.74)*** (4.27)*** 

Underwriter Reputation 0.899 0.907 0.916 0.911 0.198 0.200 0.203 0.200 

(8.89)*** (8.99)*** (9.07)*** (9.04)*** (8.56)*** (8.70)*** (8.77)*** (8.71)*** 

Avg Age of Existing IVCs 0.008 0.008 0.008 0.008 0.038 0.037 0.042 0.033 -0.001 -0.001 0.000 -0.003 

(2.70)*** (2.69)*** (2.69)*** (2.65)*** (1.44) (1.40) (1.59) (1.26) (0.13) (0.19) (0.07) (0.40) 

Log (Total Assets) 1.089 1.089 1.089 1.089 6.405 6.378 6.386 6.374 1.119 1.112 1.114 1.109 

(43.25)*** (43.16)*** (43.15)*** (43.14)*** (20.30)*** (20.22)*** (20.23)*** (20.20)*** (17.42)*** (17.36)*** (17.32)*** (17.33)*** 

Share of Firm Sold in IPO -0.526 -0.529 -0.533 -0.531 0.652 0.761 0.736 0.692 -0.941 -0.910 -0.912 -0.907 

(3.46)*** (3.35)*** (3.32)*** (3.37)*** (0.56) (0.66) (0.67) (0.59) (2.91)*** (2.78)*** (2.58)*** (2.99)*** 

Log(Total Amount Invested 

by VCs) 

0.040 0.043 0.044 0.044 0.227 0.230 0.276 0.267 0.029 0.030 0.042 0.036 

(3.16)*** (3.38)*** (3.50)*** (3.46)*** (1.90)* (1.94)* (2.34)** (2.26)** (1.18) (1.24) (1.72)* (1.52) 

EBITDA/Sales 0.573 0.567 0.546 0.540 -0.086 0.394 -0.061 -0.666 -0.120 0.015 -0.100 -0.290 

(1.99)** (1.97)** (1.86)* (1.83)* (0.05) (0.22) (0.04) (0.38) (0.27) (0.03) (0.26) (0.61) 

CE in Total Assets 0.564 0.565 0.566 0.566 -0.936 -0.964 -0.959 -0.942 0.348 0.340 0.339 0.340 

(2.11)** (2.11)** (2.12)** (2.12)** (0.59) (0.61) (0.60) (0.59) (0.92) (0.90) (0.90) (0.91) 

R&D In Total Assets 0.009 0.009 0.009 0.009 -0.001 0.006 -0.001 -0.008 -0.003 -0.001 -0.002 -0.005 

(2.44)** (2.42)** (2.30)** (2.27)** (0.03) (0.24) (0.03) (0.34) (0.43) (0.13) (0.46) (0.74) 

Observations 4180 4180 4180 4180 4180 4180 4180 4180 4180 4180 4180 4180 

R-squared 0.47 0.47 0.47 0.47 0.54 0.54 0.54 0.54 0.42 0.42 0.42 0.43 

40

Table 7a 

Valuation of CVC Backed and IVC Backed IPOs: Univariate Tests 

This table reports the cross-sectional distribution of the relationship between offer price (OP), first trading day secondary market price (SMP), and intrinsic value (IV) for IPOs from 1980 to 2004. 

Panel A reports underpricing. Panel B reports ratio of the offer price to intrinsic value. Panel C reports ratio of the first trading day secondary market price to intrinsic value (SMP/IV). The intrinsic 

value is the fair value of the IPO firm computed based on (i) market price-to-sales, market price-to-EBITDA, or market price-to-earnings ratios of an industry peer (the industry peer is a comparable 

publicly traded firm in the same Fama and French (1997) industry as the IPO firm and has the closest sales and EBITDA profit margin (EBITDA/Sales) in the pre-IPO fiscal year. OP/IV is the ratio of 

the offer price to the estimated intrinsic value of an IPO stock), and (ii) using residual income model (RIM) of Ohlson (1990). “CVC” stands for IPO firms with at least one CVC investor. “IVC” 

represents IPO firms backed by IVCs alone. “HCVC” stands for IPO firms where the CVCs’ share in total VC investment is above 20% while “LCVC” stands for the IPO firms with small financial 

presence of CVCs (below 15%). Wilcoxon p-value corresponds to the Wilcoxon rank sum test for median OP/IV equal to 1. ***, **, and * indicate significance at the 1, 5, and 10 percent levels, 

respectively, for Wilcoxon-Mann-Whitney rank sum test for the equality of medians of two sub-samples. “Overall” represents the aggregate sample of IPOs across years. The IPOs are from SDC 

Platinum and all other data are from CRSP and Compustat. 

Sample Size Sample Size 

CVC IVC Diff Z-stat CVC IVC HCVC LCVC Diff Z-stat HCVC LCVC 

Panel A: Underpricing (SMP/OP) 

Underpricing 1.182 1.083 0.10*** (6.02) 458 1639 1.219 1.149 0.07 (1.27) 158 246 

Panel B: Ratio of Offer Price to Intrinsic Value (OP/IV) 

Sales Price Multiple 5.063 2.901 2.16*** (5.63) 413 1482 5.666 4.982 0.68 (0.16) 135 227 

EBITDA Price Multiple 3.843 2.268 1.57*** (3.40) 113 998 4.963 3.279 1.68* (1.38) 34 65 

Earnings Price Multiple 2.498 2.098 0.40 (1.17) 91 848 2.031 2.613 -0.58 (1.16) 27 52 

Enterprise Value Price Multiple 3.844 2.267 1.58*** (3.42) 113 996 4.964 3.281 1.68* (1.38) 34 65 

RIM r=13%, g=5% 7.466 5.974 1.49 (0.94) 86 657 8.173 6.987 1.19 (0.08) 28 46 

RIM r=13%, g=0% 7.816 6.679 1.14 (0.91) 85 651 8.173 7.895 0.28 (0.09) 28 45 

Panel C: Ratio of First trading Day Secondary Market Price to Intrinsic Value (SMP/IV) 

Sales Price Multiple 6.296 3.266 3.03*** (6.60) 413 1482 8.506 5.622 2.88 (0.42) 135 227 

EBITDA Price Multiple 4.381 2.560 1.82*** (3.72) 113 998 6.623 4.283 2.34* (1.55) 34 65 

Earnings Price Multiple 2.946 2.451 0.50* (1.56) 91 848 2.469 3.109 -0.64 (1.12) 27 52 

Enterprise Value Price Multiple 4.383 2.548 1.84*** (3.74) 113 996 6.623 4.284 2.34* (1.55) 34 65 

RIM r=13%, g=5% 8.124 6.675 1.45 (1.15) 86 657 9.249 7.448 1.80 (0.10) 28 46 

RIM r=13%, g=0% 9.058 7.645 1.41 (1.13) 85 651 9.268 8.610 0.66 (0.14) 28 45 

40

Table 7b 

Valuation of CVC Backed and IVC Backed IPOs: Multivariate Tests 

This table reports the results of the regression analysis of the IPO firms’ valuation at the offer price. The dependent variable is the log of the offer price to intrinsic value ratio log(OP/IV). The OP/IV 

ratio is generated by the basic comparable firm approach using the Sales price multiple. The independent variables are the VC backing dummy, the CVC backing dummy, number of CVCs, CVC share 

of total amount invested by VCs, number of CVC in the same Fama French industry as the IPO firm (“CVC Industry Match”), underwriter reputation, number of analysts following the firm in the first 

year after the IPO, and the number of institutional investors participating in the IPO. The control variables are size (log of Total Assets), share of the firm sold in IPO, size of VC investment (log of total 

amount invested by all VCs), IPO firm operating performance characteristics prior to IPO, industry dummies, and year dummies. Robust t-statistics are reported in parentheses. ***, **, and * indicate 

significance at the 1, 5, and 10 percent levels, respectively. 

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 

VC Backing Dummy 0.368 0.366 0.355 0.363 0.386 0.384 0.376 0.381 0.371 0.369 0.361 0.365 

(3.28)*** (3.25)*** (3.12)*** (3.20)*** (3.42)*** (3.39)*** (3.29)*** (3.35)*** (3.30)*** (3.27)*** (3.18)*** (3.22)*** 

CVC Backing Dummy 0.351 0.298 0.281 

(3.79)*** (3.24)*** (3.06)*** 

Number of CVC 0.134 0.104 0.091 

(3.01)*** (2.41)** (2.11)** 


0.407 0.259 0.238 

Investment 

(1.47) (0.93) (0.85) 

CVC Industry Match 0.108 0.071 0.044 

(1.99)** (1.88)* (1.39) 

Underwriter Reputation 0.061 0.062 0.063 0.063 0.045 0.046 0.046 0.046 0.040 0.041 0.041 0.041 

(4.36)*** (4.45)*** (4.48)*** (4.47)*** (3.23)*** (3.30)*** (3.30)*** (3.30)*** (2.88)*** (2.95)*** (2.94)*** (2.94)*** 

Number of Institutional 

0.017 0.017 0.018 0.017 0.015 0.015 0.015 0.015 

Investors 

(8.95)*** (8.97)*** (9.13)*** (9.11)*** (7.31)*** (7.35)*** (7.42)*** (7.46)*** 

Number of Analysts 0.035 0.035 0.036 0.035 

(4.10)*** (4.09)*** (4.25)*** (4.17)*** 

Avg Age of Existing IVCs 0.006 0.006 0.005 0.006 0.006 0.006 0.006 0.006 0.006 0.006 0.006 0.006 

(1.73)* (1.73)* (1.67)* (1.79)* (1.93)* (1.93)* (1.90)* (1.98)** (1.93)* (1.93)* (1.90)* (1.96)* 

Log (Total Assets) -0.222 -0.224 -0.224 -0.224 -0.334 -0.337 -0.339 -0.339 -0.357 -0.360 -0.362 -0.362 

(8.21)*** (8.30)*** (8.26)*** (8.28)*** (11.63)*** (11.73)*** (11.77)*** (11.77)*** (12.23)*** (12.33)*** (12.40)*** (12.38)*** 

Log(Total Amnt Invested by 0.008 0.011 0.014 0.014 0.004 0.007 0.010 0.010 0.003 0.006 0.009 0.009 

VCs) 

(0.67) (0.93) (1.22) (1.21) (0.35) (0.60) (0.84) (0.83) (0.28) (0.54) (0.74) (0.75) 

Share of Firm Sold in IPO -1.275 -1.273 -1.278 -1.281 -1.297 -1.296 -1.302 -1.304 -1.266 -1.266 -1.269 -1.273 

(4.04)*** (3.93)*** (3.85)*** (3.92)*** (3.91)*** (3.81)*** (3.75)*** (3.79)*** (3.93)*** (3.83)*** (3.77)*** (3.80)*** 

EBITDA/Sales -0.006 -0.006 -0.007 -0.007 -0.007 -0.007 -0.008 -0.008 -0.007 -0.008 -0.008 -0.008 

(0.24) (0.24) (0.28) (0.27) (0.28) (0.28) (0.31) (0.31) (0.30) (0.31) (0.33) (0.33) 

CE in Total Assets 0.242 0.243 0.246 0.247 0.287 0.289 0.292 0.293 0.259 0.262 0.263 0.265 

(0.84) (0.84) (0.85) (0.86) (1.00) (1.00) (1.01) (1.02) (0.90) (0.91) (0.92) (0.92) 

R&D In Total Assets -0.010 -0.010 -0.011 -0.011 -0.011 -0.011 -0.012 -0.012 -0.011 -0.012 -0.013 -0.013 

(0.31) (0.31) (0.35) (0.34) (0.35) (0.35) (0.39) (0.38) (0.37) (0.38) (0.41) (0.41) 

Observations 3750 3750 3750 3750 3750 3750 3750 3750 3750 3750 3750 3750 

R-squared 0.16 0.16 0.16 0.16 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 

41

Table 8 

Post-IPO Stock Return Performance of CVC Backed and IVC Backed IPOs 

The table presents the time-series regressions of post-IPO monthly returns of CVC backed and IVC backed IPO firms using Fama- 

French’s three-factor model: 

(Rpt – Rft) = α + β (Rmt – Rft) + s SMBt + h HMLt + εt, 

where Rpt is the return on the portfolio of sample firms in month t; Rmt is the return on the index of NYSE, Amex, and NASDAQ stocks in 

month t; Rft is the 3-month T-bill yield in month t; SMBt is the return on small firms minus the return on large firms in month t; and HMLt 

is the return on high book-to-market stocks minus the return on low book-tomarket stocks in month t. The factor definitions are described 

in Fama et al. (1993). The sample period is January 1980 to December 2004, and sample firm returns are included in a particular monthly 

portfolio if the firm's IPO occurred within the last 36 months. Panel A presents 

Parameter estimates are presented with t-statistics in parentheses. 

α β s h m R 2 

Panel A: OLS Regressions for Equal Weighted Portfolio of IPO Firms 

CVC backed 1.714 1.331 1.434 -1.137 -0.320 0.72 

(4.03)*** (13.97)*** (9.01)*** (7.37)*** (3.13)*** 

IVC backed 0.578 1.191 1.254 -0.594 -0.322 0.9 

(2.78)*** (21.76)*** (15.69)*** (7.11)*** (4.47)*** 

CVC-IVC 1.096 0.128 0.171 -0.553 0.003 0.14 

(3.02)*** (1.85)* (1.30) (4.22)*** (0.04) 

LCVC 0.879 1.362 1.294 -1.039 -0.314 0.78 

(2.47)** (11.94)*** (10.47)*** (7.41)*** (3.02)*** 

HCVC 1.832 1.327 1.389 -1.171 -0.331 0.64 

(3.56)*** (11.70)*** (6.91)*** (6.28)*** (2.75)*** 

LCVC-HCVC -0.501 0.089 0.023 0.087 0.045 0.03 

(1.14) (0.74) (0.13) (0.53) (0.45) 

Panel A: WLS Regressions for Value Weighted Portfolio of IPO Firms 

CVC backed 3.621 1.382 1.030 -1.676 -0.153 0.71 

(6.68)*** (11.30)*** (6.40)*** (8.02)*** (0.96) 

IVC backed 2.475 1.283 0.917 -0.991 -0.040 0.84 

(9.62)*** (16.33)*** (8.82)*** (8.85)*** (0.54) 

CVC-IVC 1.102 0.089 0.106 -0.689 -0.113 0.14 

(2.40)** (0.93) (0.69) (4.02)*** (0.83) 

LCVC 3.007 1.511 0.827 -1.648 -0.114 0.7 

(5.16)*** (10.94)*** (4.96)*** (6.62)*** (0.64) 

HCVC 3.786 1.287 1.173 -1.646 -0.126 0.61 

(5.92)*** (8.30)*** (6.01)*** (6.90)*** (0.73) 

LCVC-NCVC -0.436 0.257 -0.164 0.056 -0.036 0.02 

(0.69) (1.79)* (0.87) (0.22) (0.25) 

40

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