This study examines the value relevance of financial statement data and nonfinancial statement information within and across the pre‐IPO venture capital and post‐IPO public equity markets. For a sample of U.S. biotechnology firms, I find that financial statements are highly value‐relevant in the venture capital market, and that the signs of the associations between equity values and financial statement data in that market are similar to those in the public equity market, despite significant structural differences between the two. I also find that the value relevance of financial statements generally increases as firms mature, consistent with financial statements capturing the increasing intensity of assets‐in‐place relative to future investment options. In contrast, the value relevance of nonfinancial statement information decreases as firms mature, indicating that, in a dynamic sense, financial statements and nonfinancial statement information of venture‐backed pre‐IPO biotech companies are information substitutes in valuation, not complements.
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1 April 2005
Research Article|
April 01 2005
The Value Relevance of Financial Statements in the Venture Capital Market
John R. M. Hand
John R. M. Hand
The University of North Carolina at Chapel Hill.
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Online ISSN: 1558-7967
Print ISSN: 0001-4826
American Accounting Association
2005
The Accounting Review (2005) 80 (2): 613–648.
Citation
John R. M. Hand; The Value Relevance of Financial Statements in the Venture Capital Market. The Accounting Review 1 April 2005; 80 (2): 613–648. https://doi.org/10.2308/accr.2005.80.2.613
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