| This dissertation studies the effect of venture capitalists on the decisions of newly-public corporations after the IPO. I investigate venture capitalists’ role as information conduits in mergers and acquisitions, specifically, their role while serving on the board of directors of acquiring firms, target firms, or both. Chapter 1 finds that the information sharing between a VC and a firm’s management results in valueenhancing acquisitions of VC-backed private targets, especially when the acquirer and target share a venture capital board member. I also document that this holds true with public targets, which is evidence in support of the information sharing hypothesis rather than the cheap targets hypothesis. Chapter 2 shows that VC-backed firms are significantly more likely to receive bids and get acquired following their initial public offering. I also find that they receive higher premiums while the venture capitalist sits on the board of directors. This seems to come from extracting the negotiation surplus, as the acquirer of VCbacked targets experiences more pronounced negative announcement returns while the combined announcement return is on average unaffected. I interpret this as evidence of a wealth transfer from the acquirer to the target firm. I attribute this to the certification and negotiating abilities of the venture capitalist serving on the target firm’s board of directors, documenting a further method venture capitalists can add value to corporations. |
