The Underpricing of Venture Capital Backed IPOs in China

Wang, Luxia and Chong, Terence Tai Leung and He, Yiyao and Liu, Yuchen (2018): The Underpricing of Venture Capital Backed IPOs in China.

Abstract

This paper measures the influence of venture capital (VC) on IPO valuations in China. It is found that the authentication effect is dominated by the grandstanding effect, suggesting that VC firms in China greatly value their reputations. It is also shown that the market-specific characteristics of non-VC-backed firms are more closely related to their initial returns, compared to those of VC-backed firms. In addition, corporate fundamentals play a more important role in the valuation for VC-backed firms than for non-VC-backed firms.

• Item Type: MPRA Paper
• Language: English
• Keywords: Venture Capital, IPO, Price Volatility.
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies

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