Abstract
The venture capitalists provide supervision and certification service for shareholding enterprises, which reduce the information asymmetry and attract more high quality investment banks. Thus, the price is close to the market price when the enterprise enters the market and under-pricing is avoided thereby. Based on the supervision and certification hypothesis, this paper builds a pricing model of investment banks and venture capital to explain the pricing mechanism of investment bank, investment risk pricing mechanism and the causes of underpricing.
Highlights
The venture capital market is a highly competitive market
Under the condition of separation and equilibrium, investment banks can accurately distinguish the types of two types of venture capital through observation; the strategy of venture capital is consistent with the belief of investment banks
According to Proposition 3, there is a separation and equilibrium in the pricing of new shares proposed by high reputation venture capital funds
Summary
The venture capital market is a highly competitive market. There are differences in the links and networks formed between venture capital and other institutions in the capital market. This kind of solid relationship helps the venture companies to successfully carry out IPOs and obtain higher stock prices in the secondary market, which is conducive to the exit of venture capital and enhances its reputation [3]. Their reputation is critical to the success of raising the venture capital fund. As a new type of professional financial intermediation, venture capital is different from traditional financing channels, which is for mature enterprises with strong stability, but invests in innovative enterprises with high growth and high risks to solve the financing of innovative SMEs problem [4]
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