IPO underpricing, wealth losses and the curious role of venture capitalists in the creation of public companies
Lower underpricing amongst venture-backed IPOs has been attributed to a certification role for venture capitalists. We argue that differences in underpricing per se are uninformative and possibly misleading when not controlling for differences in entrepreneurs' incentives to control underpricin...
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| Format: | Working paper |
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University of Oxford
1999
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| _version_ | 1826292309264695296 |
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| author | Ljungqvist, A |
| author_facet | Ljungqvist, A |
| author_sort | Ljungqvist, A |
| collection | OXFORD |
| description | Lower underpricing amongst venture-backed IPOs has been attributed to a certification role for venture capitalists. We argue that differences in underpricing per se are uninformative and possibly misleading when not controlling for differences in entrepreneurs' incentives to control underpricing. Using 1980s and 1990s data, we show that entrepreneurs' wealth losses, a more suitable measure than underpricing, are unaffected by the presence of venture backers. Thus, we find no evidence of venture certification as far as IPO pricing is concerned. We also find possible evidence of a conflict of interest between venture backers and entrepreneurs which could explain why more prestigious underwriters in the 1990s are associated with higher underpricing. |
| first_indexed | 2024-03-07T03:12:42Z |
| format | Working paper |
| id | oxford-uuid:b4ba8142-1b07-47b5-8949-89c81d1261d7 |
| institution | University of Oxford |
| last_indexed | 2024-03-07T03:12:42Z |
| publishDate | 1999 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:b4ba8142-1b07-47b5-8949-89c81d1261d72022-03-27T04:28:16ZIPO underpricing, wealth losses and the curious role of venture capitalists in the creation of public companiesWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:b4ba8142-1b07-47b5-8949-89c81d1261d7Bulk import via SwordSymplectic ElementsUniversity of Oxford1999Ljungqvist, ALower underpricing amongst venture-backed IPOs has been attributed to a certification role for venture capitalists. We argue that differences in underpricing per se are uninformative and possibly misleading when not controlling for differences in entrepreneurs' incentives to control underpricing. Using 1980s and 1990s data, we show that entrepreneurs' wealth losses, a more suitable measure than underpricing, are unaffected by the presence of venture backers. Thus, we find no evidence of venture certification as far as IPO pricing is concerned. We also find possible evidence of a conflict of interest between venture backers and entrepreneurs which could explain why more prestigious underwriters in the 1990s are associated with higher underpricing. |
| spellingShingle | Ljungqvist, A IPO underpricing, wealth losses and the curious role of venture capitalists in the creation of public companies |
| title | IPO underpricing, wealth losses and the curious role of venture capitalists in the creation of public companies |
| title_full | IPO underpricing, wealth losses and the curious role of venture capitalists in the creation of public companies |
| title_fullStr | IPO underpricing, wealth losses and the curious role of venture capitalists in the creation of public companies |
| title_full_unstemmed | IPO underpricing, wealth losses and the curious role of venture capitalists in the creation of public companies |
| title_short | IPO underpricing, wealth losses and the curious role of venture capitalists in the creation of public companies |
| title_sort | ipo underpricing wealth losses and the curious role of venture capitalists in the creation of public companies |
| work_keys_str_mv | AT ljungqvista ipounderpricingwealthlossesandthecuriousroleofventurecapitalistsinthecreationofpubliccompanies |