Public Market Players in the Private World: Implications for the Going-Public Process

59 Pages Posted: 24 Jan 2017 Last revised: 9 Nov 2018

See all articles by Shiyang Huang

Shiyang Huang

The University of Hong Kong - Faculty of Business and Economics

Yifei Mao

Cornell University - SC Johnson College of Business - Finance Department

Cong (Roman) Wang

Goizueta Business School, Emory University

Dexin Zhou

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Date Written: November 8, 2018

Abstract

Recent years have seen a dramatic increase in investment by public market institutional investors in the private market. We study the economic consequences of these investments for the initial public offerings of startups. We find that institutions' pre-IPO participation is associated with lower IPO underpricing for VC-backed startups. Our further analysis shows that the reduction in IPO underpricing does not appear to be driven by endogenous matching between startups and institutions. We explore the underlying economic mechanisms, and our results are consistent with a substitution effect between institutions and all-star analysts.

Keywords: IPO Underpricing, Venture Capital, Institutions

JEL Classification: G23; G24; L13

Suggested Citation

Huang, Shiyang and Mao, Yifei and Wang, Cong (Roman) and Zhou, Dexin, Public Market Players in the Private World: Implications for the Going-Public Process (November 8, 2018). Available at SSRN: https://ssrn.com/abstract=2898548 or http://dx.doi.org/10.2139/ssrn.2898548

Shiyang Huang

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Yifei Mao

Cornell University - SC Johnson College of Business - Finance Department ( email )

Ithaca, NY 14850
United States

Cong (Roman) Wang

Goizueta Business School, Emory University ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

HOME PAGE: http://www.congromanwang.com

Dexin Zhou (Contact Author)

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

55 Lexington Avenue
New York, NY 10010
United States

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