 IPO Underpricing, Wealth Losses and the Curious Role of Venture Capitalists in the Creation of Public CompaniesNo 1999-FE-04, Economics Series Working Papers from University of Oxford, Department of Economics Abstract: Lower underpricing amongst venture-backed IPOs has been attributed to a certification role for venture capitalists. We argue that differences in underpricing per se are uninformative and possibly misleading when not controlling for differences in entrepreneurs` incentives to control underpricing. Using 1980s and 1990s data, we show that entrepreneurs’ wealth losses, a more suitable measure than underpricing, are unaffected by the presence of venture backers. Thus, we find no evidence of venture certification as far as IPO pricing is concerned. We also find possible evidence of a conflict of interest between venture backers and entrepreneurs which could explain why more prestigious underwriters in the 1990s are associated with higher underpricing. Keywords: initial public offerings; underpricing; intermediation; certification; venture capital (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:1999-fe-04 Access Statistics for this paper More papers in Economics Series Working Papers from University of Oxford, Department of Economics Contact information at EDIRC. |
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