Dr Anup Basnet

Venture capital firms (VCs) provide certification and monitoring services to the initial public offering (IPO) companies they finance, as has been well documented in the academic literature. Yet, there are few studies that explore what role – if any – VCs play when an IPO company is subsequently acquired, particularly if that acquisition is legally contested. Using a sample of 721 M&A offers for US VC-backed IPO companies, announced between 1996 and 2018, we find that a takeover bid that occurs in the presence of the lead VC commands a higher target firm valuation and is less likely to be legally contested than a bid for a company from which the lead VC has already exited. In addition, companies in which the lead VC is present enjoy higher stock-price returns in response to M&A announcements. Our results provide new evidence regarding VC certification and monitoring – including its role as a litigation deterrent – long after the IPO.

We examine the evolution of lead venture capital firm (VC) ownership after their portfolio companies (PCs) are publicly listed. We find that, on average, lead VCs retain their shares for three years post-IPO. Higher liquidity pressure and better stock market performance lead to faster VC exits, while higher VC reputation, better VC monitoring, and higher quality PCs lead to slower exits. VCs mostly use sales in the open market, share distributions, and mergers and acquisitions to divest their shares. Higher liquidity pressure incentivizes VCs to use majority share distributions, while better stock market performance increases their preference for continuous sales.

This paper investigates whether shareholder class action litigation affects the takeover candidacy, premium, and completion rate of mergers and acquisitions involving defendant target firms. We use a comprehensive dataset of publicly traded U.S. firms that became the targets of takeover bids between 1998 and 2016 and find that firms subject to shareholder class action lawsuits within the previous two years are more likely to be targeted for acquisition while commanding a significantly higher premium. Firms that face such litigation after a takeover announcement experience a significant decrease in takeover completion.

The authors find that larger firms tend to invest more in green projects, whereas firms that are highly valued or more profitable are less likely to go green. In terms of country-level determinants, we find that the gross domestic product (GDP) per capita and population are positively related with GI, while GDP growth and surface area are negatively associated with GI. Additionally, firms in common-law countries and English-speaking countries make fewer GI than firms in other countries.

We examine why venture capital firms re-invest in portfolio companies also after the IPO. Companies are taken public earlier than optimal, resulting in lower post-IPO returns, and a greater likelihood of, and shorter time to, the first post-IPO VC refinancing.

We study firms’ decisions to stay or leave the Russian market amid the invasion of Ukraine. Lower ESG scores increase the likelihood of keeping the Russian operations unchanged. Higher scores lead to less negative stock market reactions following complete exits.