The effects of R&D, venture capital, and technology on the underpricing of IPOs in Taiwan

The effects of R&D, venture capital, and technology on the underpricing of IPOs in Taiwan Information asymmetry and value uncertainty causes high -research and development (R&D) or high-tech Initial Public Offerings (IPOs) to become underpriced. Venture capital can serve as a moderator to mitigate the information asymmetry and value uncertainty to reduce IPO underpricing. High-tech industries significantly contribute to Taiwan’s economic growth. With the unique Taiwan data, we find that venture-backed IPOs are less underpriced. More importantly, IPO underpricing due to technology decreases with the use of venture capital and decreases with the interaction between R&D expenditure and technology. Technology requirement reduces the underpricing of high-R&D IPOs. Accordingly, R&D spending reduces the underpricing of high-tech IPOs. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

The effects of R&D, venture capital, and technology on the underpricing of IPOs in Taiwan

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Publisher
Springer Journals
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-011-0259-7
Publisher site
See Article on Publisher Site

Abstract

Information asymmetry and value uncertainty causes high -research and development (R&D) or high-tech Initial Public Offerings (IPOs) to become underpriced. Venture capital can serve as a moderator to mitigate the information asymmetry and value uncertainty to reduce IPO underpricing. High-tech industries significantly contribute to Taiwan’s economic growth. With the unique Taiwan data, we find that venture-backed IPOs are less underpriced. More importantly, IPO underpricing due to technology decreases with the use of venture capital and decreases with the interaction between R&D expenditure and technology. Technology requirement reduces the underpricing of high-R&D IPOs. Accordingly, R&D spending reduces the underpricing of high-tech IPOs.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Oct 18, 2011

References

  • Allocations, adverse selection, and cascades in IPOs: evidence from the Tel Aviv stock exchange
    Amihud, Y; Hauser, S; Kirsh, A
  • Why do venture capital firms exist? Theory and Canadian evidence
    Amit, R; Brander, J; Zott, C
  • Is R&D always beneficial?
    Chang, HL; Su, CW
  • The underpricing and excess returns of initial public offerings in Taiwan based on noisy trading: a stochastic frontier model
    Chen, A; Hung, CC; Wu, CS
  • IPO anomalies and innovation capital
    Chin, CL; Lee, P; Kleinman, G
  • The separation of ownership and control in East Asian Corporations
    Claessens, S; Djankov, S; Lang, L
  • Explaining the short- and long-term IPO anomalies in the US by R&D
    Guo, RJ; Lev, B; Shi, C
  • The impacts of R&D investment on company performance: US vs. Taiwanese technology-intensive industry
    Han, I; Chuang, CM

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