Abstract
This study introduces venture capital investment as a variable in underpricing of stock’s IPO. From the theoretical perspective, this study uses four points of view—Certification, Supervision, Adverse selection and Grandstanding theory, to explain the relationship of venture capital investment and underpricing of IPO. In real empirical part, this study takes 125 second-board companies as a sample to research on the relationship among venture capital investment, the characteristics of venture capital and underpricing of IPO. The finding shows that in the second-board market, companies which have venture capital institutions involved show a higher IPO underpricing rate compared to the companies which have no venture capital institutions involved. The main finding is that there is irrational investment behavior in the market.
Highlights
As of the end 2014, there are more than 400 companies listed on second-board market, which have provided a new financing channel for many innovative small and medium-sized enterprises
This study introduces venture capital investment as a variable in underpricing of stock’s IPO
The finding shows that in the second-board market, companies which have venture capital institutions involved show a higher IPO underpricing rate compared to the companies which have no venture capital institutions involved
Summary
As of the end 2014, there are more than 400 companies listed on second-board market, which have provided a new financing channel for many innovative small and medium-sized enterprises. The high underpricing level will attract people to purchase new shares, use pricing discrepancies to arbitrage, have negative effects on fund allocation of capital market. Venture capital investment refers to a way of operation that the venture capital institutions invest innovative small and medium-sized enterprises in the form of purchasing shares, venture capital institutions participate the company’s. Venture capital investment promoted the normal operation of second-board market, and became an important channel to solute financing difficulty of many small and medium-sized enterprises. Second-board market provided the best exit channel for venture capital; it made venture capital get involved in the capital market to promote innovative small and medium-sized enterprises’ development
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