Effects Of Venture Capital On IPO Underpricing Of Listed Companies On ChiNext

Scientific and technological innovation is the driving force for sustainable development of a country and a new growth point for its economy. Meanwhile, venture capital’s investment on scientific and technological innovation activities which have prospective future can play a significant role in the economical growth and strategies of establishing an innovative country in China.Before the establishment of Chinext, no favorable withdraw channel was provided for venture capitals in Chinese capital market. This deficiency has led the overseas listing of numerous Chinese enterprises in which venture capitals participate.However, with the establishment of Chinext, more and more venture capitals which participate in the listing of enterprises have achieved the process of withdrawing. On one hand, it resolves the problems of fund raising for small and medium-sized enterprises in China; on the other hand, it provides a favorable withdraw channel for venture capitals.Even though Chinext has been established for three years, the under pricing rate for IPO of an enterprise has been staying at high level. According to the data from CSMAR, among355enterprises listed in Chinext (December31st,2012) face an average rise of34.41%in their IPO days which is much higher than the main board market (23.70%) and small and medium-sized board market (27.67%) at the same time. As an important participant in the listing of enterprises, venture capital has a considerable influence on the under pricing rate for IPO of an enterprise. Based on such background, the present thesis aims to investigate the influence of venture capital investment on the under pricing of IPO in Chinext.This thesis can be divided into five chapters:Chapter one is an introduction which includes the background and significance of the research. Chapter two further discusses the definition of venture capital, its development in China, the development of Chinext and development of Chinese venture capital in Chinext. Through a comprehensive review of literature, the present thesis indicates some potential influence of venture capital investmenton the under pricing of IPO in Chinext.Chapter three and four mainly discuss the related theories in this field and present an empirical study based on these theories. Specifically, chapter three is a review of the related theories which includes theories of IPO under pricing, theories of venture capital’s influence on IPO under pricing and previous researches from Chinese scholars. On the basis of such theories, the present thesis mainly focuses on two theories of venture capital’s influence on IPO under pricing and concludes some hypotheses proposed by foreign scholars, aiming to provide a theoretical foundation for the study.Chapter four mainly discusses the research methodology. The sample chosen in this study are355enterprises from Chinext (December31st,2012). In analysis procedure, descriptive analysis, variance analysis and multiple regression analysis are adopted to better present the influence of venture capital’s investment on IPO under pricing of enterprises. These analyses are made from four perspectives:1) whether venture capitals participate in the listing of enterprises;2) the reputation of venture capitals;3) the background of venture capitals;4) whether venture capitals have the background of brokers or not.Chapter five mainly makes a brief summary of the findings in chapter four and analyzes the related data. From the findings, the present author points out the potential problems existing in Chinese venture capitals and Chinext. Limitations of the study and suggestions for future researches are also provided in this chapter.The findings of the study indicate that the participation of venture capitals in the listing has a certain degree of negative influence on the IPO under pricing of enterprises in Chinext. There is potential effect of reputation on IPO under pricing. However, latter analyses from the four perspectives indicate that this kind of effect is not significant. The possible reasons which can account for this result are:1) venture capitals in China still belong to emerging industry and their investment behaviors are not mature enough;2) there might be coordinated behaviors between venture capitals and those enterprises which would like to be listed.