Skip to main content
Top
Published in: Review of Quantitative Finance and Accounting 4/2023

17-03-2023 | Original Research

Underpricing of corporate and independent venture capital-backed IPOs: Do they differ?

Authors: Fatima Shuwaikh, Emmanuelle Dubocage, Dennis Murer

Published in: Review of Quantitative Finance and Accounting | Issue 4/2023

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

Building on a resource-based view, this study argues that independent venture capital (IVC) firms and corporate venture capital (CVC) firms have different impacts on the underpricing of their backed initial public offerings (IPOs). This is due to their different resources, motivations, and interests. Using a sample of 612 VC-backed IPOs from 2000 to 2020, we find a significant difference in underpricing among CVC- and IVC-backed IPOs. The matching method used by Megginson and Weiss (1991) and propensity score matching both show significant differences in underpricing between CVC-backed and IVC-backed IPOs. This paper shows that the difference in the influence of CVC and IVC backing on underpricing in IPOs has changed over time. While there was a significant difference from 2000–2009 in our models, this difference was no longer present in the more recent period of 2010–2020.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Literature
go back to reference Barry CB, Muscarella CJ, Peavy J, Vetsuypens MR (1990) The role of venture capital in the creation of public companies*1: Evidence from the going-public process. J Financ Econ 27:447–471CrossRef Barry CB, Muscarella CJ, Peavy J, Vetsuypens MR (1990) The role of venture capital in the creation of public companies*1: Evidence from the going-public process. J Financ Econ 27:447–471CrossRef
go back to reference Black B, Gilson RJ (1998) Venture capital and the structure of capital markets: banks versus stock markets. J Financ Econ 47:243–277CrossRef Black B, Gilson RJ (1998) Venture capital and the structure of capital markets: banks versus stock markets. J Financ Econ 47:243–277CrossRef
go back to reference Certo ST, Covin JG, Daily CM, Dalton DR (2001) Wealth and the effects of founder management among ipo-stage new ventures. Strateg Manage j 22:641–658CrossRef Certo ST, Covin JG, Daily CM, Dalton DR (2001) Wealth and the effects of founder management among ipo-stage new ventures. Strateg Manage j 22:641–658CrossRef
go back to reference Gompers P, Lerner J (2000) Money chasing deals? The impact of fund inflows on private equity valuation. J Financ Econ 55:281–325CrossRef Gompers P, Lerner J (2000) Money chasing deals? The impact of fund inflows on private equity valuation. J Financ Econ 55:281–325CrossRef
go back to reference Gompers P, Lerner J (1998) Venture capital distributions: short-run and long-run reactions. J Financ 53:2161–2183CrossRef Gompers P, Lerner J (1998) Venture capital distributions: short-run and long-run reactions. J Financ 53:2161–2183CrossRef
go back to reference Gompers PA, Lerner JA (2004) The venture capital cycle. MIT Press, Cambridge Mass Gompers PA, Lerner JA (2004) The venture capital cycle. MIT Press, Cambridge Mass
go back to reference Lin TH, Smith R (1998) Insider reputation and selling decisions: the unwinding of venture capital investments during equity IPOs. J Corp Finan 4:241–263CrossRef Lin TH, Smith R (1998) Insider reputation and selling decisions: the unwinding of venture capital investments during equity IPOs. J Corp Finan 4:241–263CrossRef
go back to reference Loughran T, Ritter J (2004) Why has IPO underpricing changed over time? Financ Manage 33:5–37 Loughran T, Ritter J (2004) Why has IPO underpricing changed over time? Financ Manage 33:5–37
go back to reference Loughran T, Ritter J (2002) Why don’t issuers get upset about leaving money on the table in IPOs? Review of Financial Studies 15:413–444CrossRef Loughran T, Ritter J (2002) Why don’t issuers get upset about leaving money on the table in IPOs? Review of Financial Studies 15:413–444CrossRef
go back to reference McGough R, Smith R (1999) IPO issuers don't mind money left on the table. Wall Street J 3(1) McGough R, Smith R (1999) IPO issuers don't mind money left on the table. Wall Street J 3(1)
go back to reference Metrick A, Yasuda A (2021) Venture capital and the finance of innovation. John Wiley & Sons Metrick A, Yasuda A (2021) Venture capital and the finance of innovation. John Wiley & Sons
go back to reference Mogilevsky V, Murgulov Z (2012) Underpricing of private equity backed, venture capital backed and non-sponsored IPOs. Invest Manage Financ Innov 9:47–59 Mogilevsky V, Murgulov Z (2012) Underpricing of private equity backed, venture capital backed and non-sponsored IPOs. Invest Manage Financ Innov 9:47–59
go back to reference Muscarella CJ, Vetsuypens MR (1989) A simple test of Baron’s model of IPO underpricing. J Financ Econ 24:125–135CrossRef Muscarella CJ, Vetsuypens MR (1989) A simple test of Baron’s model of IPO underpricing. J Financ Econ 24:125–135CrossRef
go back to reference Ritter J, Welch I (2002) A Review of IPO activity, pricing and allocations (Yale School of Management Working Paper). Yale School of Management Ritter J, Welch I (2002) A Review of IPO activity, pricing and allocations (Yale School of Management Working Paper). Yale School of Management
Metadata
Title
Underpricing of corporate and independent venture capital-backed IPOs: Do they differ?
Authors
Fatima Shuwaikh
Emmanuelle Dubocage
Dennis Murer
Publication date
17-03-2023
Publisher
Springer US
Published in
Review of Quantitative Finance and Accounting / Issue 4/2023
Print ISSN: 0924-865X
Electronic ISSN: 1573-7179
DOI
https://doi.org/10.1007/s11156-023-01144-5

Other articles of this Issue 4/2023

Review of Quantitative Finance and Accounting 4/2023 Go to the issue