An analysis of the impact of RD on IPO underpricing In Korean SMEs: The moderating role of venture capital

摘要

Over the last two decades, a number of studies have documented that Initial Public Offerings (IPOs) of equity are underpriced and made an attempt to identify the reasons for this underpricing phenomenon. Based on information asymmetry theory and signaling theory, many studies have shown that both venture capital investment and R&D (Research and Development) are respectively important factors to influence IPO underpricing. However, previous studies haven't exhibited how venture capital functions as a moderator between R&D investment and underpricing of IPOs. Therefore, this study investigates the relationship between R&D investment and underpricing of IPOs to clarify the moderating effect of venture capital investment, using IPO data of Korean high tech firms. The samples were drawn from 591 IPO companies which have registered to KOSDAQ (Korea Securities Dealers Automated Quotation) from 2001 to 2009. The empirical results have the significantly positive relationship between R&D and underpricing of IPOs. Findings also show, in Korean IPO SMEs, that venture capital involvement moderates the relationship between R&D investment and underpricing of IPOs.