The effects of R&D, venture capital, and technology on the underpricing of IPOs in Taiwan

Cheng Lu (), Lanfeng Kao and Anlin Chen

Review of Quantitative Finance and Accounting, 2012, vol. 39, issue 4, 423-445

Abstract: Information asymmetry and value uncertainty causes high -research and development (R&D) or high-tech Initial Public Offerings (IPOs) to become underpriced. Venture capital can serve as a moderator to mitigate the information asymmetry and value uncertainty to reduce IPO underpricing. High-tech industries significantly contribute to Taiwan’s economic growth. With the unique Taiwan data, we find that venture-backed IPOs are less underpriced. More importantly, IPO underpricing due to technology decreases with the use of venture capital and decreases with the interaction between R&D expenditure and technology. Technology requirement reduces the underpricing of high-R&D IPOs. Accordingly, R&D spending reduces the underpricing of high-tech IPOs. Copyright Springer Science+Business Media, LLC 2012

Keywords: High-tech firms; Initial public offerings; R&D expenditure; Technology; Venture capital; G24 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (10)

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DOI: 10.1007/s11156-011-0259-7

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