The role of venture capital in IPOs: Evidence from Shenzhen Stock Market

In this paper, with the sample data of VC-backed and non-VC-backed IPOs listed in Shenzhen Stock Market during the period from Sep. 25th. 2009 to Sep. 17th. 2010, the two traditionally considered certification and grandstanding roles of venture backing in IPOs in Chinese Stock Market is empirically examined. These overall empirical results show that: at time of the medium-small-sized enterprises' going public in China, the effect of number of venture capitalists and ratio of the venture capitalists' shareholdings to IPOs shares on both the level of IPO underpricing and issue cost aren't obvious. There is no evidence to support that the venture capitalist specialize his investments in firms to provide either intensive certification services or grandstanding services.