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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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  • Schertler, Andrea

    ()
    (The Kiel Institute for World Economics)

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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Bibliographic Info

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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Web page: http://www.intech.unu.edu

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

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References

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  1. 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.
  2. Andrea Schertler, 2001. "Venture Capital in Europe's Common Market: A Quantitative Description," Kiel Working Papers 1087, Kiel Institute for the World Economy.
  3. 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.
  4. Gompers, Paul A., 1996. "Grandstanding in the venture capital industry," Journal of Financial Economics, Elsevier, vol. 42(1), pages 133-156, September.
  5. Yasushi Hamao & Frank Packer & Jay R. Ritter, 1998. "Institutional affiliation and the role of venture capital: evidence from initial public offerings in Japan," Staff Reports 52, Federal Reserve Bank of New York.
  6. 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.
  7. 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.
  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.
  9. 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.
  10. 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.
  11. 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.
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Cited by:
  1. Riccardo Ferretti & Antonio Meles, 2010. "Underpricing, wealth loss for pre-existing shareholders and the cost of going public: the role of private equity backing in Italian IPOs," Venture Capital, Taylor & Francis Journals, vol. 13(1), pages 23-47, September.
  2. Achleitner, Ann-Kristin & Fingerle, Christian H., 2004. "What you get is what you need? The role of venture capitalists in managing growth of new ventures," CEFS Working Paper Series 2004-05, Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München.

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