| IPO is known as one of the most crucial event in an enterprise’s financing. The efficiency of IPO pricing, from micro perspective, determines whether the enterprise is able to raising the largest amount of funds at the minimal price of shares. From the macro perspective, it contributes to the efficiency of Chinese capital market and is helpful for the capital market’s better support to real economy. However, the low efficiency of IPO pricing on China’s GEM adversely affects start-ups as well as the capital market. Based on "certification hypothesis" and "grandstanding hypothesis", we deem VCs who play an irreplaceable role in IPO on GEM, can exert significant influence on the efficiency of IPO pricing on GEM. Besides, underwriter’s reputation is incorporated into this research as one relevant factor due to its vital part in IPO process.By combining the latest researches, this paper begins with fundamental theories of the efficiency of IPO pricing, VCs and underwriter’s reputation. We focus on the mechanism of how VCs affect the efficiency of IPO pricing and the differences underwriter’s reputation makes to the relationship between VCs and the efficiency of IPO pricing.The results suggest that higher shareholding ratio of VCs leads to less efficient IPO pricing in the primary market. However, the more mature a VC is, the more efficient the corresponding IPO pricing will be in the primary market. But this relationship is utterly opposite in the secondary market. Moreover, the rounds of VCs investments are positively related to the efficiency of IPO pricing in the primary market, testifying to "certification hypothesis". And the degree to which VCs are engaged in corporate governance is negatively related to the efficiency of IPO pricing in the primary market. Finally, the negative correlation between the shareholding ratio of VCs and the efficiency of IPO pricing in the primary market would be attenuated by the advancement of underwriter’s reputation. |
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