An Empirical Study On The Impact Of Venture Capital On IPO Underpricing In China's GEM

IPO,the English full name Initial Public Offerings.Investors participating in IPOs can obtain stable risk-free returns,which is called IPO underpricing.IPO underpricing is widespread in various stock markets around the world,but is particularly acute in emerging markets such as China,Brazil and India.Chinese venture capital originated in the 1990 s.Investing in start-ups and choosing to exit after realizing income is its main business model.IPO exit is one of the most profitable exit methods for venture capitals.China's venture capitals ushered in explosive growth after the opening of the GEM,studying the relationship between venture capitals and the IPO underpricing of the GEM is of great significance to improving the pricing efficiency of new share,improving the construction of the GEM supervision system and standardizing the venture capital industry.This paper selects the companies listed on the GEM between October 30,2009 and December 31,2012 as research samples,proposes research hypotheses based on the theory of adverse selection,then conducts the research on the relationship between venture capitals' support and IPO underpricing on the GEM.The empirical results of Ordinary Least Square linear regression shows that the support of venture capitals will significantly increase the IPO underpricing of the GEM.In the sub-samples that exclude companies without the support of venture capitals,this paper proposes the hypothesis and studies the relationship between the characteristics of venture capitals and the IPO underpricing of the GEM.The selected characteristics of venture capitals are: the influence of venture capitals,the background of venture capitals and venture capitals those investment cycle are shorter than one year.The results of Ordinary Least Square linear regression show that the high influence of venture capital institutions will increase the degree of IPO underpricing,but this relationship is not significant,and if the venture capital has a state-owned background,it will significantly increase the degree of IPO underpricing,moreover,if the venture capital has a investment cycle shorter than one year,it will also significantly increase the IPO underpricing.Finally,based on the results of empirical research,this paper proposes policy recommendations for the three major IPO participants of venture capitals,regulatory agencies and entrepreneurial enterprises.