The impact of venture capital backing on the corporate governance of Australian initial public offerings

This study explores the role of venture capitalists on investee boards at the time of listing for 552 initial public offerings. Australian board structures and mechanisms are more similar to those in the US and the United Kingdom, but market activity characteristics are more similar to Japanese and German systems. Further, the Australian private equity market is relatively young compared to US and European markets. IPOs backed by venture capital have more independent boards, similar to US IPOs. Venture capitalists improve governance by using their networks to recruit specialist independent directors with industry experience.Governance Venture capital Initial public offerings

The pricing and impact of rights issues of equity in Australia

We investigate abnormal returns resulting from the announcement of a rights issue in Australia and are the first study outside the United States and the United Kingdom to examine the pricing of rights issues and the determinants of that pricing. Rights issues generate a significantly negative abnormal return and, on average, are priced at a discount. The determinants of the announcement effect are analysed using a two-stage approach controlling for the endogeneity of the price discount. We first estimate the predicted discount and then include it as an independent variable in the announcement effect regression. The discount is positively related to the offer size and negatively related to underwriter quality, supporting underwriter certification models. We also include variables that have not been tested in any market, such as shareholder concentration which is negatively related to the discount implying that firms with higher shareholder concentration do not offer a significant discount as their shareholders wish to maintain their percentage holding in the firm. Further, the abnormal returns have a negative relationship with the predicted price discount, and a positive relationship with the use of proceeds. Finally, announcements made by resource firms generate larger negative reactions than other issuers.

Venture capitalist value-added activities, fundraising and drawdowns

This paper is the first to introduce an analysis of the effect of different types of venture capitalist value-added activities (financial, administrative, marketing, strategic/management) on fundraising. In addition, we include an analysis of the functional difference between committed funds and drawdowns from capital commitments vis-à-vis pension funds and venture capital funds. The new comprehensive data, collected by the Australian Bureau of Statistics for 1999-2001, enable controls for venture capitalist performance, risk, investment activity, and management and performance fees. The results indicate that significantly more capital is allocated to venture capitalists that provide financial and strategic/management expertise to entrepreneurial firms (as opposed to marketing and administrative expertise). In addition, fundraising is greater among funds with higher returns and performance fees and lower fixed management fees. In contrast, drawdowns from capital commitments are greater among venture capital funds that provide financial and marketing expertise to investees (as opposed to strategic and administrative expertise), and among funds with higher performance fees and fixed management fees. Further, the results indicate an adverse impact on venture capital fundraising from illiquidity attributable to a 2-year lock-up period in IPO exits over the period considered