Grandstanding and Spinning in VC Backed IPOs on AIM UK
38 Pages Posted: 19 Jun 2013
Date Written: May 14, 2013
We study a hand-collected dataset that includes 507 IPOs on the UK Alternative Investment Market (AIM) from FY2004 to FY2010. IPOs backed by venture capitalists registered an average underpricing of 25.8 percent; almost double that of non-venture-backed IPOs (14.6%). We provide new empirical evidence that grandstanding and spinning increase IPO underpricing. Conversely venture capitalists provide a certification role when they avoid moral hazard behaviors. Firms may strategically exploit these phenomena to accelerate growth while market regulators have to evaluate this evidence in light of stricter or more prone to laissez faire policies.
Keywords: Venture Capital, AIM UK, Underpricing, Grandstanding, Spinning
JEL Classification: G20, G24
Suggested Citation: Suggested Citation