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

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  • Pennacchio, Luca

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.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48695.

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Date of creation: Jan 2013
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Handle: RePEc:pra:mprapa:48695

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Keywords: Venture capital; IPOs; Certification Hypothesis; Underpricing;

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