Venture Capital‐Backed and Commitments Test Entity Initial Public Offerings on the Asx

33 Pages Posted: 19 Mar 2020

See all articles by Zoltan Murgulov

Zoltan Murgulov

Monash University - Department of Banking and Finance, Monash Business School; Financial Research Network (FIRN)

Alastair Marsden

University of Auckland

S. Ghon Rhee

University of Hawaii at Manoa - Shidler College of Business; University of Hawaii at Manoa - Department of Financial Economics and Institutions

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area

Date Written: June 2019

Abstract

This paper examines initial returns to venture capital (VC) backed and non‐VC‐backed IPO companies on the Australian Securities Exchange (ASX). We find support for the theoretical predictions of Rossetto (2008), by providing empirical evidence that VC‐backed CTE IPOs exhibit greater wealth losses to pre‐IPO investors compared to non‐VC‐backed CTE IPOs during hot issue markets. We also find that greater retained ownership increases IPO underpricing. In the subsample of IPOs with below the median level of retained ownership IPOs, VC‐backed CTE IPOs and VC‐backed, non‐CTE IPOs have significantly higher levels of underpricing and wealth loss compared to non‐VC‐backed, non‐CTE IPOs.

Keywords: Initial public offerings, Underpricing: Wealth losses, Venture capital, Commitments test entity

Suggested Citation

Murgulov, Zoltan and Marsden, Alastair and Rhee, S. Ghon and Veeraraghavan, Madhu, Venture Capital‐Backed and Commitments Test Entity Initial Public Offerings on the Asx (June 2019). Accounting & Finance, Vol. 59, Issue 2, pp. 1265-1297, 2019, Available at SSRN: https://ssrn.com/abstract=3556044 or http://dx.doi.org/10.1111/acfi.12261

Zoltan Murgulov (Contact Author)

Monash University - Department of Banking and Finance, Monash Business School ( email )

900 Dandenong Rd
Caulfield East
Victoria 3145
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Alastair Marsden

University of Auckland

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

S. Ghon Rhee

University of Hawaii at Manoa - Shidler College of Business ( email )

2404 Maile Way
C-304, FEI/CBA
Honolulu, HI 96822
United States

University of Hawaii at Manoa - Department of Financial Economics and Institutions ( email )

United States

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area ( email )

Bangalore
Manipal, Karnataka 576104
India
+91-820-2701030 (Phone)

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