Underpricing of venture backed IPOs: a meta-analysis approach. Issue 4 (18th May 2020)

• Record Type: Journal Article
• Authors: Tanda, Alessandra; Manzi, Giancarlo
• Is Part Of: Economics of innovation and new technology. Volume 29:Issue 4(2020)
• Page Start: 331
• Page End: 348
• Publication Date: 2020-05-18
• Subjects: Venture capital -- underpricing -- IPO -- meta-analysis -- meta-regression; G24 -- G10 -- G32; Technological innovations -- Economic aspects -- Periodicals; 338.06405
• DOI: 10.1080/10438599.2019.1625154
• Languages: English
• ISSNs: 1043-8599

Abstract

ABSTRACT: Listing firms are subject to underpricing mainly because of asymmetries of information, but IPOs backed by a venture capitalist are generally found to be subject to less underpricing. Although this condition is commonly verified by the empirical evidence, a consistent number of studies finds contrasting results. This paper aims to answer to the question: do venture capitalists effectively reduce underpricing at IPO? Evidence provides a negative answer, with venture-backed IPOs having higher underpricing especially in US markets. Meta-regression results confirm the different effect of VC between US and European IPOs. Results overall suggest that other explanations on underpricing might hold in US markets.