The Impact of Venture Capital Ownership on IPO Underpricing: Evidence from European Markets
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Bachelor's thesis
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Date
2023
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Rahoitus
Language
en
Pages
23 + 5
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Abstract
In this thesis, I investigate the impact of venture capital (VC) backing on the underpricing of initial public offerings (IPO). Employing European data from United Kingdom, Germany, France, and Italy, I use a sample of 922 IPOs from 2000 to 2022. My study is inspired by Megginson & Weiss (1991), who find that VC backed IPOs experience smaller degrees of underpricing due to certification hypothesis. To contribute to the existing literature, I study the phenomenon in a new time period, in the 21st century, in European markets, where only few studies have been conducted on this topic. I regress underpricing on VC backing and multiple control variables. Furthermore, I build on the existing literature by adding country, year, and industry fixed effects. I discover that VC backing has a negative effect on IPO underpricing, implying that VC backed IPOs are less underpriced in Europe during the sample period. The results are robust to multiple additional tests.Description
Thesis advisor
Vihriälä, ErkkiKeywords
venture capital, initial public offering, IPO, underpricing, initial return