Do Private Equity Investors Create Value for Italian Initial Public Offerings?
International Review of Finance, Forthcoming
Posted: 16 Jul 2011
Date Written: July, 16 2011
This study analyses the role of private equity backing in initial public offerings (IPOs) using a dataset of 227 companies that went public on the Milan Stock Exchange between January 1995 and December 2007. The evidence rejects the certification and monitoring hypotheses and provides considerable support for the market power hypothesis. In accordance with Chemmanur and Loutskina (2006), we suggest that private equity investors exploit their relationships with the key IPO market players to attract attention to the IPOs of firms backed by private equity, thus obtaining a higher equity valuation (both in the IPO and in the secondary market).
Keywords: IPO valuation; venture capital; private equity
JEL Classification: G23, G24, G32, G34
Suggested Citation: Suggested Citation