Munich Personal RePEc Archive

The causal effect of venture capital backing on the underpricing of Italian IPOs

Pennacchio, Luca (2013): The causal effect of venture capital backing on the underpricing of Italian IPOs.

[img]
Preview
PDF
MPRA_paper_48695.pdf

Download (568kB) | Preview

Abstract

This paper analyses the role of venture capitalists in Italian Initial Public Offerings (IPOs). Between 1999 and 2012 venture capital backed IPOs are on average less underpriced than non-venture backed IPOs. By using both a matching and a regression-based approach to account for the non-random distribution of venture financing across firms, I show that the underpricing difference is actually due to the causal effect of venture capital backing and that the raw comparison of the sample means underestimates such an effect. The result is consistent with the certification hypothesis, that is, certifying that the value of issuing firms reflects all relevant inside information, venture capital backing reduces the asymmetric information problem that arises in the IPO process.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.