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Abstract
This dissertation is composed of two independent essays that explore how private market transactions are related to the performance of publicly traded investments. In the first chapter, I study the relationship between large, late-stage venture capital rounds (“private” IPOs or PIPOs) and the subsequent operating and stock price performance of the PIPO’s publicly traded peer firms. I find that PIPOs generally precede periods of positive industry growth and on average, peer firms earn positive and significant CARs around event dates. However, using textual analysis to identify close rivals to the PIPO companies, I find that the close rival short-term price reactions, long-term operating performance, and long-term stock returns are worse than non-rival industry peers after a PIPO is completed. These findings are suggestive of increased product market competition following a PIPO in the industry. In the second chapter, I study the relative performance of mutual funds that invest in venture capital (VCMF) to those mutual funds that do not invest in venture capital (non-VCMFs). I find that, on average, VCMFs outperform non-VCMFs as measured using several traditional performance measures. Further, I demonstrate that the outperformance can be attributed to the funds’ public stock holdings and superior stock selection skills in industries that overlap with the funds’ venture investments. I find no evidence of liquidity-induced performance drags and, with an event-study on investor flows, show that fund investors reallocate their capital to VCMFs in the months after a new venture investment is announced.