| Pub. Date | : October, 2021 |
|---|---|
| Product Name | : The IUP Journal of Accounting Research and Audit Practices |
| Product Type | : Article |
| Product Code | : IJARAP011021 |
| Author Name | : James Dominic |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 14 |
The study models the association among exit routes adopted by Venture Capital (VC) firms, Investee Firms (IFs) industry and the overall market condition. It examines 210 exit transactions in India, which occurred between 2000 and 2018, and finds that exits are seasonal irrespective of the exit routes. Bull markets are critical for exits irrespective of the exit routes. Venture Capital Funds (VCFs) try to time the market for exits irrespective of the route adopted for the exit. Surprisingly, buybacks are also associated with a bullish market which is characterized by high valuations. No industry is superior to any other industry in timing the market. However, Banking and Financial Services Industry (BFSI) possesses exit opportunities even in the bear market.
Exit mechanism is key to the entrepreneurial process for a thriving Venture Capital (VC) industry (Dominic and Gopalaswamy, 2019). Entrepreneurs and VCs realize their share of wealth in the Investee Firm (IF) only when they exit the investment (Covin et al., 2001; and Cumming and Johan, 2008). Successful and timely exits are crucial for the VCs as they help in recycling funds for new investments (Mason and Harrison, 2006) and reputation building for the VCs (Gompers, 1996; and Hibara, 2004). Reputation building further gives the much-required confidence to limited partners (LP) in the VC market, making fundraising easy for the VC firms (Neus and Walz, 2005; and Gemson and Annamalai, 2015). Given the fact that VC investors make investments with the intention to exit with maximum ease and significant return on their investments, it is time that the focus of entrepreneurial research shifts to VC exit. This study aims at contributing to the limited body of literature about VC exits by investigating the association that exists among the exit routes adopted by VC firms, IFs industry and the overall market condition. Specifically, the focus is on identifying the interactions among market cycles, the six different sectors to which the portfolio firms belong, and the exit route adopted, namely, Initial Public Offering (IPO), strategic sale (mergers and acquisitions), secondary sale and buyback.