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The Certification Role of Private Equity Investors: Evidence from Initial Public Offerings on the Nouveau Marché and the Neuer Markt

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Author Info
Schertler, Andrea () (The Kiel Institute for World Economics)

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Abstract

This paper presents an empirical analysis of whether independent and dependent private equity investors affect the underpricing of firms which went public on the Nouveau Marché and on the Neuer Markt between 1997 and 2000. In the sample of the Neuer Markt, the involvement of private equity investors reduces the underpricing of the firms' shares only if private equity investors sell a part of their pre-flotation shares at the initial public offering (IPO). By contrast, in the sample of Nouveau Marché, private equity investors have no significant impact on the underpricing. Moreover, this paper presents an empirical analysis of whether dependent and independent private equity investors behave differently when the firms that they have financed go public. While the two groups of private equity investors do not differ with respect to their effect on underpricing, they do differ with respect to changes in their number of shares and thus with respect to their divestment behaviour. Independent private equity investors sell significantly more shares when their firms go public than their dependent counterparts do

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Paper provided by United Nations University, Institute for New Technologies in its series EIFC - Technology and Finance Working Papers with number 10.

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Date of creation: 2002
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Handle: RePEc:dgr:unutaf:eifc02-10

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Related research
Keywords: Private Equity; Underpricing; Initial Public Offerings; Neuer Markt; Nouveau Marché;

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Find related papers by JEL classification:
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure

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  1. Alexander Ljungqvist, 1999. "IPO Underpricing, Wealth Losses and the Curious Role of Venture Capitalists in the Creation of Public Companies," OFRC Working Papers Series 1999fe04, Oxford Financial Research Centre. [Downloadable!]
  2. Megginson, William L & Weiss, Kathleen A, 1991. " Venture Capitalist Certification in Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(3), pages 879-903, July. [Downloadable!] (restricted)
  3. Schertler, Andrea, 2001. "Venture Capital in Europe's Common Market: A Quantitative Description," EIFC - Technology and Finance Working Papers 4, United Nations University, Institute for New Technologies. [Downloadable!]
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  4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
  5. Gompers, Paul A., 1996. "Grandstanding in the venture capital industry," Journal of Financial Economics, Elsevier, vol. 42(1), pages 133-156, September. [Downloadable!] (restricted)
  6. Titman, Sheridan & Trueman, Brett, 1986. "Information quality and the valuation of new issues," Journal of Accounting and Economics, Elsevier, vol. 8(2), pages 159-172, June. [Downloadable!] (restricted)
  7. Brav, Alon & Gompers, Paul A, 1997. " Myth or Reality? The Long-Run Underperformance of Initial Public Offerings: Evidence from Venture and Nonventure Capital-Backed Companies," Journal of Finance, American Finance Association, vol. 52(5), pages 1791-1821, December. [Downloadable!] (restricted)
  8. Lin, Timothy H. & Smith, Richard L., 1998. "Insider reputation and selling decisions: the unwinding of venture capital investments during equity IPOs," Journal of Corporate Finance, Elsevier, vol. 4(3), pages 241-263, September. [Downloadable!] (restricted)
  9. Carter, Richard B & Manaster, Steven, 1990. " Initial Public Offerings and Underwriter Reputation," Journal of Finance, American Finance Association, vol. 45(4), pages 1045-67, September. [Downloadable!] (restricted)
  10. Yasushi Hamao & Frank Packer & Jay Ritter, 1998. "Institutional affiliation and the role of venture capital: evidence from initial public offerings in Japan," Research Paper 9807, Federal Reserve Bank of New York. [Downloadable!]
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  11. Schertler, Andrea, 2002. "The Determinants of Underpricing: Initial Public Offerings on the Neuer Markt and the Nouveau Marché," EIFC - Technology and Finance Working Papers 12, United Nations University, Institute for New Technologies. [Downloadable!]
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  12. Keasey, Kevin & McGuinness, Paul, 1995. " Underpricing in New Equity Listings: A Conceptual Re-appraisal," Small Business Economics, Springer, vol. 7(1), pages 41-54, February.
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