Grandstanding and Spinning in VC Backed IPOs on AIM UK

38 Pages Posted: 19 Jun 2013

See all articles by Alberto Dell'Acqua

Alberto Dell'Acqua

SDA Bocconi

Antonio Guardasole

Bocconi University

Stefano Bonini

Stevens Institute of Technology - School of Business

Date Written: May 14, 2013

Abstract

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

Dell'Acqua, Alberto and Guardasole, Antonio and Bonini, Stefano, Grandstanding and Spinning in VC Backed IPOs on AIM UK (May 14, 2013). Available at SSRN: https://ssrn.com/abstract=2280411 or http://dx.doi.org/10.2139/ssrn.2280411

Alberto Dell'Acqua (Contact Author)

SDA Bocconi ( email )

Via Bocconi 8
Milan, Milan 20136
Italy

Antonio Guardasole

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Stefano Bonini

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

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