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

Luca Pennacchio

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Venture capital; IPOs; Certification Hypothesis; Underpricing (search for similar items in EconPapers)
JEL-codes: G14 G24 G32 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-acc and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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