Venture Capital and Risk Management: Evidence from Initial Public Offerings

摘要

Using prospectuses from a large group of ventures preparing to do an IPO, this paper analyzed the risk disclosures between IPOs that are backed by venture capitalists and those that are not. The results indicate that venture capitalists are associated with IPOs that disclose significantly more risk factors related to operating profit margin and long run sales generation. Risk factors for operating profit margin generally include pricing pressures from competitors and cost pressures from suppliers, while risk factors for sales generation include obstacles for customers to establish a repeat pattern of ordering. The results also indicate that venture capitalists are not associated with a higher number of risk factors related to operational financing which typically include any problem that hinders the firm's ability to produce cash flows from operations. Lastly, the results indicate that IPOs backed by a venture capitalist improve more in terms of fiscal strength during the year after the offering than IPOs not backed by a venture capitalist.