TY - JOUR T1 - Impact of Quality of Involvement of VC/PE in IPO Firms: Evidence from India JF - The Journal of Alternative Investments DO - 10.3905/jai.2021.1.138 SP - jai.2021.1.138 AU - Soumya G Deb AU - Pradip Banerjee Y1 - 2021/07/13 UR - https://pm-research.com/content/early/2021/07/13/jai.2021.1.138.abstract N2 - This article draws its primary motivation from the steady rise in the participation and involvement of venture capital/private equity (VC/PE) funds in the Indian IPO market over the last couple of decades. The study explores the involvement quality of the VC/PE managers and its impact on the long-run equity and operating performance of Indian firms issuing securities through initial public offerings (IPOs). Using data for 173 IPOs backed by VC/PE funding (out of a total of 625 IPOs) from 2000 to 2016, the authors show that post-issue, both equity market performance and operating performance of these VC/PE-backed IPOs are unimpressive in general. The information asymmetry, mispricing, and ‘timing the market’ do not seem to be reasons for such long-term underperformance. The authors argue that it may be a case of too much money chasing too few winners in the Indian VC/PE-backed IPO market. The study utilizes a unique, hand-collected data set (from IPO prospectuses) on VC/PE firms’ involvement quality. Findings indicate that the duration and the size of the stake that the VC/PE firms hold in the pre-issue period positively affect the post-issue performance of IPOs. These findings lend support to the previously theorized ‘monitoring’ and ‘certification’ role of VC/PE firms.TOPICS: Real assets/alternative investments/private equity, private equity, emerging markets, performance measurement, legal/regulatory/public policy, financial crises and financial market historyKey Findings▪ Both long-term market and operating performance of VC/PE-backed IPOs in India from 2000 to 2016 were unimpressive.▪ The quality of VC/PE involvement has some impact on the post-IPO performance of investee firms.▪ The VC/PE-backed IPOs are not engaged in timing (hot and cold periods) the market. ER -