Study On The Influence To IPO Market Performance On The First Day Of Venture Capital’s Participation

GEM operation for three years in China, more and more innovative companies involved in through the IPO. On the first-day, the GEM IPO showed high price, high price earning ratio, high under-pricing rate, and many other highlighted performance. Venture capital institutions play an important role in the process of IPO. It is significant to research on role of the venture capital institutions to support the performance of GEM IPO, to improve the system of GEM IPO and develop the venture capital industry in China.This paper summarized several theory about venture capital institutions firstly, and then generalized development course and present situation of the growth enterprise market and GEM market in China. On these basis, we analyzed the mechanism of action and the impact of the mechanism of the venture investment institutions, GEM, entrepreneurial enterprise among.In this paper, we use355IPO companies which are listed in Shenzhen GEM since October2009as the research sample. By analyzing under-pricing rates and earnings indicators, we investigate the influence of venture capital institutions on the stock price on the first day of IPO, and test whether these venture capital institutions play their operational effectiveness and policy role.Firstly, comparing the market performance indicators of VC-backed companies and non-vc-backed capital on the IPO day by means of descriptive statistics according to the IPO time, we see whether there are significant differences in the same Year. Then based on the descriptive statistical analysis, with the independent sample t test, independent samples nonparametric Mann-whiney test, we compare the measures on the company’s IPO, so as to measure the differences between the VC-backed companies and non-VC-backed companies.By calculating the statistical parameters, we find (1) the IPO life of VC-backed company is less than non-VC-backed companies, which indicates that China’s venture capital industry is still in the early stages of development and venture capital institutions tend to make enterprises listed as soon as possible in order to establish a reputation in the market. It also proves the existence of "Grandstanding Hypothesis" in China’s GEM market.(2) VC-backed companies’ listing costs are less than non-VC-backed companies, and they are more likely to hire a well-known securities underwriters, audit and evaluation agencies,which shows that the company is more likely to gain market recognition after the "certification " role of venture capital institutions.(3) Although the VC-backed companies have higher price-earnings ratio, under-pricing rate and stock volatility on the first day of IPO,it does not mean VC-backed companies are recognized by the market.However, it is caused by the unique "new" speculative speculation psychology in China’s stock market and irrational investors.Finally, we summarized the conclusion, take some policy implications from legislation to speed up the venture capital industry, innovation GEM IPO issuance system, investor education, and improve GEM delisting system. And provide policy reference for the development of China’s venture capital industry and the GEM system.