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The Ownership Background of Venture Capital and IPO Underpricing Rate

In: Liss 2023

Author

Listed:
  • Dehan Jiao

    (Beijing Jiaotong University)

  • Xuemei Li

    (Beijing Jiaotong University)

  • Guanyi Liu

    (Beijing Jiaotong University)

  • Yumeng Mao

    (Beijing Jiaotong University)

Abstract

This paper takes listed companies with venture capital backgrounds in China’s SMEs, GEM from 2014–2019 and STAR from 2019–2020 April, divides venture capital ownership backgrounds, and adopts cross-sectional multiple regressions to explore the impact of venture capital ownership backgrounds on the IPO price suppression rate of invested firms and its mechanism of action. It is found that joint investment by venture capitalists with different ownership backgrounds can reduce the IPO price suppression rate of enterprises, and venture capitalists with Sino-foreign joint venture backgrounds have a positive effect on the IPO price suppression rate of enterprises. It is confirmed that joint investment can effectively reduce the IPO price suppression rate of enterprises by forming social networks and mobilizing resources to enhance enterprise value. The above-mentioned effects are significantly stronger in the STAR sample, indicating that the pilot registration system, with its multiple rounds of inquiries and public responses, effectively conveys information to the market, allowing investors to form more rational judgments, and has a more significant effect on reducing the IPO price suppression rate. Sino-foreign joint venture capital has a stronger positive effect on the IPO price suppression rate due to its high reputation, which attracts investors more significantly. The positive impact on the IPO price suppression rate is stronger.

Suggested Citation

  • Dehan Jiao & Xuemei Li & Guanyi Liu & Yumeng Mao, 2024. "The Ownership Background of Venture Capital and IPO Underpricing Rate," Lecture Notes in Operations Research, in: Daqing Gong & Yixuan Ma & Xiaowen Fu & Juliang Zhang & Xiaopu Shang (ed.), Liss 2023, pages 804-818, Springer.
    • Handle: RePEc:spr:lnopch:978-981-97-4045-1_63
    DOI: 10.1007/978-981-97-4045-1_63
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