Can Venture Capital Funds Pick Winners? Evidence from Pre-IPO Survival Rates and Post-IPO Performance

This Paper evaluates the ability of venture capital funds to identify and bring to market successful high-tech Israeli companies during the period 1991 to 2000. Using a newly constructed and highly detailed database we find that: (1) The probability of survival until the IPO stage is higher for venture-backed companies. (2) According to several different measures, conditional on making an IPO, the post-listing performance of venture-backed companies is not statistically different from that of non-venture companies throughout the 1990s. We interpret this as evidence that an important contribution of the venture capital industry may be in increasing the survival rates of young technology-intensive firms, rather than in identifying high performers.IPO; long-run performance; survival rate; venture capital

Monetary Policy in an Open Economy: The Differential Impact on Exporting and Non-Exporting Firms

Using firm-level data, we provide evidence that, although monetary policy affects real investment, the effect operates differentially: the greater its export intensity the less a firm is affected by tight money. We examine several interpretations and conclude that the impact is transmitted primarily through the supply side due to differential access to credit markets. This finding lends support to the commonplace view that monetary policy is less effective the more open the economy.corporate finance; interest rate; investment; leverage; liquidity; publicly traded firms; Tobin's q

Conflict of Interest in Universal Banking: Bank Lending, Stock Underwriting, and Fund Management

Using a newly-constructed data set on Israeli Initial Public Offering (IPO) firms in the 1990s, we study costs and benefits of universal banking. We find that a firm whose equity was underwritten by a bank-affiliated underwriter, when the same bank was also a large creditor of the firm in the IPO year, exhibits significantly better than average post-issue accounting performance, but that its stock performance during the first year following the IPO is considerably lower than average. When an investment fund managed by the same bank is heavily involved in the IPO as buyer of the newly-issued equity, the stock performance during the first year following the IPO is even lower. This, together with negative first day returns, is indicative of IPO overpricing. We interpret these findings as evidence that universal banks use their superior information regarding client firms to float the stock of the cherries, not the lemons (as measured by post-issue accounting performance), but that bank managed funds pay too much for bank underwritten IPOs, at the expense of the investors in the funds. These results suggest that there is conflict of interest in the combination of bank lending, underwriting, {\em and\/} fund management.Bank Underwriting And Fund Management; Conflict Of Interest; Initial Public Offerings; Universal Banking

Monetary Policy in an Open Economy:

Using firm-level data, we provide evidence that, although monetary policy affects real investment, the effect operates differentially: the greater its export intensity the less a firm is affected by tight money. We examine several interpretations and conclude that the impact is transmitted primarily through the supply side due to differential access to credit markets. This finding lends support to the commonplace view that monetary policy is less effective the more open the economy