Whitman School of Management at Syracuse University
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Abstract Details

EMPLOYEE EQUITY INCENTIVES AND VENTURE CAPITALIST INVOLVEMENT: EXAMINING THE EFFECTS ON IPO PERFORMANCE
Vol. Volume 13, Number 4 December/2008

JAMES W. WESTERMAN

SCOTT W. GEIGER

LINDA A. CYR


We examine the effects of venture capitalist involvement and equity incentives for all employees on the performance of initial public offering firms. Data was collected from 402 IPO firms, representing 242 non-VC backed and 160 VC backed firms. Results indicate venture capitalists positively influence the likelihood the portfolio firm will offer equity incentives to all employees. Consistent with the agency theory argument that monitoring and incentives can behave as complements to one another, the results suggest venture capitalist backing and incentive stock options for all employees operate in concert to have a positive effect on stock price performance three years after the initial public offering.



Keywords: IPO; venture capital; employee incentives; agency theory; stock options.