The Impact Of Venture Capital On IPO Short-term Excess Returns

Since the opening of Shenzhen GEM2009, there are308companies haslisted.As well as other plates at home and abroad, Shenzhen GEM has a problem—the IPO short-term excess returns. Companies listed on Shenzhen GEM get a lot ofsupport from venture capital, this paper takes Shenzhen GEM as example toinvestigate the impact of venture capital on IPO short-term excess returns.At the basic of defining the concept of venture capital, first of all, this paperreviewed research status at home and abroad. The paper reviewed the theory of IPOshort-term excess returns and the impact of venture capital on IPO short-termexcess returns,and gave a summary.Subsequently, the paper introdeced the conceptof GEM, the course of development of Shenzhen GEM, the characteristice ofShenzhen GEM, analyzed status and problems of Shenzhen GEM IPO and problemsof Shenzhen GEM market.There after, the paper established two theoretical model from the relationshipof venture capital support and IPO short-term excess returns and the relationship ofventure capital characteristice and IPO short-term excess returns these two angle,and made empirical analysis, gave three main conclusions:(1) The participation ofventure capital can not reduce the short-term excess returns of Shenzhan GEMcompanies,on the contrary, the IPO short-term excess returns of venture capitalsupport companies are significantly higher than no venture capital supportcompanies.That is,the “certification” function of venture capital dose not play arole on Shenzhen GEM.(2) The ratio of venture capital and IPO short-term excessreturns is a negative correlation,the higher the ratio of venture capital in thepre-IPO ownseship structure.,the lower underpricing.That is say in Shenzhen GEMmarket, risk investment institutions holding a higher equity proportion can avoidadverse selection behavior for the asymmetric information, the participation ofventure capital can screen a better project, the supervision and screening functionof venture capital play a role in Shenzhen GEM market.(3) The number of theparticipation of venture capital and IPO short-term excess returns is positivelyassociated.There are more venture capital background shareholders of pre-IPO ofShenzhen GEM companies, the higher underpricing. The more participation of venture capital can not improve the problem of information asymmetry of riskinvestment institutions and companies.Finally，the paper gave some useful policyrecommendations.