Uk Ipo Underpricing And Venture Capitalists

Uk ipo underpricing and venture capitalists

UK IPO Underpricing: Venture Capitalists, High-Prestige Underwriters and the Bubble Period

50 PagesPosted: 27 Feb 2005

Date Written: February 2005

Abstract

We analyse the short run underpricing anomaly for a unique sample of 569 IPOs on the London Stock Exchange for the period 1985-2000 and find significant differences between the 1985-1997 period and 1998-2000 bubble period.

Venture capitalists played a certification role in the former period but this ceased during the bubble years.

Uk ipo underpricing and venture capitalists

These years featured significant increases in the average IPO proceeds, money left on the table, underpricing and a decline in operating quality. Furthermore, venture capitalists increasingly used prestigious underwriters with a history of underpricing during 1998-2000 which supports the corruption hypothesis of Loughran and Ritter (2004).

Capital Raising Process (Underwriting)

Keywords: New issues puzzle, prospect theory; corruption hypothesis

JEL Classification: G24, G32

Suggested Citation:Suggested Citation

Hadass, Leon and Coakley, Jerry and Wood, Andrew, UK IPO Underpricing: Venture Capitalists, High-Prestige Underwriters and the Bubble Period (February 2005).

Available at SSRN: https://ssrn.com/abstract=675101 or http://dx.doi.org/10.2139/ssrn.675101

Uk ipo underpricing and venture capitalists