Rapid growth of the Korean stock market, especially KOSDAQ market, attracted a lot of entrepreneurs as well as venture capitals. As a result, many new venture businesses had been founded and new venture capitals followed the rush to supply needed capital.
The present study examines the effect of entrepreneur's ownership on firm performance after its IPO. In particular, this study focuses on how much portion of ownership between entrepreneur and venture capital should be maintained to increase the value of the start-up.
'Convergence of interest' hypothesis is tested for the venture capital-backed IPO in 1997 and 1998 in the U.S. stock market. The result partially confirmed the hypothesis. The study found that entrepreneur's stock ownership is more important than that of venture capitalists in explaining the variation of firm performance.
