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Investigating Underpricing in Venture-Backed IPOs Using Statistical Techniques

By Michael Tan   

This paper concerns applying statistical methods to investigate under-pricing in VC-backed technology Initial Public Offerings (IPOs) since the great recession. In particular, firm, market, and IPO-specific variables were explored to determine if there were any significant relationships to under-pricing. The paper focused on the Bank Preference theory of under-pricing, where under-pricing is said to occur because investment banks running IPO processes are incentivized to under-price to decrease the risk that they will not be able to allocate all the issuance to price-sensitive public markets investors.

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Advisors: Professor Daniel Xu, Professor Shawn Santo, Professor Grace Kim| JEL Codes: G3, G33, G24

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