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Luca Pennacchio
''The role of venture capital in Italian IPOs''
( 2013, Vol. 33 No.4 )
This paper analyses the role of venture capitalists in Italian Initial Public Offerings (IPOs). Between 1999 and 2012 venture capital backed IPOs are on average less underpriced than non-venture backed IPOs. By using a regression-based approach to account for the non-random distribution of venture financing across firms, I show that the lower underpricing of IPOs venture capital backed is actually due to the causal effect of venture financing. The result is consistent with the certification hypothesis, that is, certifying that the value of issuing firms reflects all relevant inside information, venture capital backing reduces the asymmetric information problem that arises in the IPO process.
Keywords: Venture capital, IPOs, Certification Hypothesis, Underpricing
JEL: G3 - Corporate Finance and Governance: General
Manuscript Received : Sep 27 2013 Manuscript Accepted : Oct 04 2013

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