Venture Capital’s Influence On IPO Underpricing Of The Company Shareheld

Throughout the development of China Growth Enterprise Market(GEM) in recent years, we can see that compared with the main board market and the small and medium-sized market, the Growth Enterprise Market performed more serious IPO underpricing. As an important participating force in the Growth Enterprise Market, what influence do the venture capital(VC) have on IPO underpricing of listed company? This is a very interesting topic worth studying. Foreign scholars’ research findings on this topic focused on the certification, screening and monitoring, adverse selection and grandstanding by VC. However, based on China’s GEM, do these roles or effects exist? There are few domestic scholars to study this issue. So this paper devotes to testing whether these roles or effects by VC exist in China’s GEM. Besides, this paper introduces some variables, such as whether VC participate the listed company, the shareholding characteristics of VC, the experience and amount of VC, the financial indicators one year before the listing date of the listed company, the market performance in the listing date of the listed company to deeply explore what influence VC exert on IPO underpricing in China’s GEM.The paper elaborates the theoretical basis-Asymmetric Information theory and VC’s roles & effects theory. Then the paper analyses the influence that VC made on IPO underpricing in China’s GEM and puts forward some hypotheses.This paper chooses the 339 companies listed on Shenzhen GEM as of December 31, 2013 as sample and divides the sample into two groups:one group with 182 companies supported by VC and the other group with 157 companies not supported by VC. Then the paper selects some important reference indices and tests the mean difference between the two groups to check whether the certification, screening and monitoring, adverse selection and grandstanding exist in our country’s GEM. Then the paper separately constructs different regression models to explore what influence VC’s participation has on IPO underpricing in our country’s GEM and what influence the shareholding characteristics, experience and amount of VC exert on IPO underpricing in our country’s GEM. The paper implements regression analysis and ultimately comes to the following conclusions:the role of certification by VC just slightly reflected, the effect of adverse selection by VC existed, neither the role of screening and monitoring nor the effect of grandstanding by VC existed; neither whether VC participated or not nor the shareholding characteristics and experience had influence on IPO underpricing; the amount of VC that the listed company contained had significantly negative influence on IPO underpricing; the reason why the IPO underpricing rate of listed companies supported by VC was higher is that the investors in the secondary market have better anticipation on listed companies supported by VC, not low issuing price.