DO NEWLY PUBLIC ACQUIRERS BENEFIT OR SUFFER FROM THEIR PRE-IPO AFFILIATIONS WITH UNDERWRITERS AND VCS?

摘要

We examine whether pre-IPO affiliations affect post-IPO corporate events, namely acquisitions. On the one hand, newly public acquirers may benefit from their pre-IPO affiliations through residual signaling value or/and resource-related benefits. On the other hand, newly public acquirers may suffer from those affiliations when conflicts of interests arise during the post-IPO period. Equity underwriters may have incentive to promote non-value-creating acquisitions (Type II error), and venture capitalists (VCs) may have incentive to forgo strategically important acquisitions (Type I error). Drawing on a sample of 4,029 acquisitions made by 717 newly public firms, we find that on average the announcement of an acquisition by a newly public acquirer elicits a positive response from investors. The market views more favorably the acquisitions announced by newly public acquirers associated with prestigious equity underwriters, but this reaction becomes negative when the lead underwriter is retained as the acquisition advisor. The market reacts more favorably to acquisitions announced by VC-backed newly public acquirers, but only when those VCs are committed to a longer lockup period. The effects of pre-IPO affiliations on expected returns are stronger for newly public acquirers with a high intangible resource base and persist throughout the three-year post-IPO period (across each subsequent acquisition announcement).