1. Introduction
IPO underpricing refers to the phenomenon that the initial public offering price of a stock is significantly lower than the initial market closing price of the listing, and this phenomenon is widespread in the capital market. It is generally believed that information asymmetry is one of the main reasons for IPO underpricing. In order to make up for investors who are at an information disadvantage [
1,
2], stock issuers will actively reduce the issuance price of stocks to promote the successful issuance of the stocks. In my country, recent study (2014) verified the impact of information asymmetry between issuers and purchasers on IPO underpricing, through empirical methods [
3].
The “Thirteenth Five-Year Plan” clearly proposes to implement an “innovation-driven development strategy” to promote the sustainable development of enterprises, with technological innovation as the core. Among them, R&D activities, as an important method of innovation realization, can promote the sustainable development of enterprises, and have attracted more and more attention from policy makers and enterprises. Although R&D activities can help enterprises maintain long-term competitive advantages and keep sustainability, they will aggravate the information asymmetry in the process of investment and financing [
2,
4]. On this basis, many scholars have carried out research on the correlation between R&D investment and IPO underpricing, and generally believe that R&D investment will increase the degree of company IPO underpricing.
The majority of companies listed on ChiNext are high-technology companies with high growth potential, and a large number of empirical studies have shown that venture capital plays a role in signaling high-quality equity offerings in the corporate process. This is because venture capital plays a monitoring and certification role, which means venture capitalists can determine which R&D activities are more likely to be successful, and they can provide investors with accurate information about R&D investment and whether the information disclosed at the IPO is true [
5]. Some scholars explores the impact of venture capital on IPO underpricing in a sample of North African companies, arguing that a good reputation for venture capital increases managerial confidence and overvalues the true price of the stock [
6]. Amit et al. argued that only those firms in bad situations tend to seek venture capital support, and venture capital-backed firms, with poor operations and quality, have relatively high IPO underpricing [
7]. Elston and Yang empirically analyzed the effect of venture capital equity structure and accounting standards on IPO underpricing, using German firms as an example [
8]. The findings show that venture capital has a significant effect on IPO underpricing in many countries, such as the U.S., but this finding is not confirmed in Germany. Pennacchio explored the role of venture capitalists in Italian IPO firms and concluded that firms with venture capital support have lower IPO underpricing rates compared to firms without venture capital support [
9]. Gompers found that venture capitalists, especially immature venture capitalists, usually push their invested firms to IPOs earlier [
10], and this improper timing of IPOs can make venture capital-backed firms have higher IPO depression rates [
11]. The above studies, in general, verify that venture capitalists recognize that venture capital investment directly transmits information about the quality of IPO firms, but whether it reduces the uncertainty of R&D activities is unclear because the effect of the interaction of venture capital R&D investment on IPO underpricing is understudied.
Compared with developed countries, China’s venture capital market is at a stage of development, with a small-scale and insufficient standardization. Therefore, it is still unclear whether Chinese venture capital can provide effective support and services to enterprises. However, it is undeniable that if market participants have professional technical knowledge related to R&D, their evaluations of companies will be relatively accurate. Venture capitalists have an advantage in this regard. They can conduct comprehensive investigations of technologies with high risks and high uncertainties. Therefore, given that previous studies have directly tested the impact of venture capital on IPO underpricing, various conclusions have emerged. This article intends to focus on indirect testing of the relationship between venture capital and IPO underpricing, and examine the impact of venture capital on R&D investment and IPO underpricing. Does underpricing have a regulatory effect?
Venture capital syndication is an investment behavior involving many venture capital institutions, which often participate in the equity financing of high-tech enterprises before going public. Compared with individual VC, syndication can not only provide more value-added services for the growth of enterprises [
12], but also deliver good market signals through the authentication and supervision functions, so it is accepted by more and more IPO companies. However, VC syndication may also lead to “free rider” behavior and aggravation of the type II agency cost [
13], which are both potential factors that trigger information asymmetry in the stock market. Then, as one of the ways of VC investment, will syndication affect the effect of R&D investment on IPO underpricing after entering the enterprise? How do the different characteristics of VC syndication affect them?
Most of the companies listed on ChiNext are high-tech companies. Compared with the main board, and small- and medium-sized companies, they invest more in R&D. Therefore, there is a higher information asymmetry. Whether this asymmetry, caused by R&D investment, will lead to higher IPO underpricing for ChiNext companies is a question worthy of attention. Venture capital, as a professional investment institution, often participates in equity financing of high-tech companies before listing. Joint investment is a syndication of venture capital; due to its good risk dispersion and resource sharing advantages, it is mostly adopted by venture capital institutions. Joint investment is naturally related to the R&D activities of enterprises. Whether its intervention has a moderating effect on the relationship between R&D investment and IPO underpricing, and whether the different characteristics of joint investment will also cause different effects, are issues worthy of discussion and research.
This article takes the companies successfully listed on ChiNext from 2009 to 2018 as a sample, and uses the literature method and empirical method to study the following issues: (1) the impact of corporate R&D investment on IPO underpricing; (2) the moderating effect of VC syndication between corporate R&D investment and IPO underpricing; (3) the moderating effect of VC syndication on corporate R&D and IPO underpricing depends on the characteristics of it. The innovation of this paper mainly lies in the following: (1) The use of the latest data. In 2014, China began to impose a limit on the rise and fall of new shares. Therefore, it is impossible to use the closing price on the first day of listing after 2014 as the basis for calculating the IPO underpricing rate. This article uses the average of the closing prices on the 5th and 10th day of listing as the calculation of IPO underpricing. The basis of the price rate makes the research results more able to reflect the actual situation in China at present. (2) The selection of adjustment variables is novel. Innovatively introduce VC syndication as a moderating variable between enterprise R&D investment and IPO underpricing, and then further explore whether the length and reputation of leading VC will play a different degree of moderating effect. The previous research on the three variables of R&D investment, VC syndication and IPO underpricing has been expanded to make it more complete.
5. Conclusions and Suggestions
5.1. Conclusions
This article uses the 2009–2018 ChiNext-listed companies as a sample to study the relationship between R&D investment and IPO underpricing, and on this basis it examines the regulatory role of venture capital. Furthermore, this article combines the role of investment duration and reputation of the leading venture capital in joint investment, to further examine the relationship between R&D investment and IPO underpricing.
The research found the following: (1) R&D investment has increased the information asymmetry between the company and external investors, and within investors. In order to release good corporate information to external investors, companies will deliberately lower the stock issue price, leading to an increase in IPO underpricing. The higher, that is, the more R&D investment, the more serious the IPO underpricing of enterprises; (2) The addition of venture capital does not play a role in certification and supervision, but more shows the “name-by-name effect”, pushing immature companies to go public. It increased the degree of IPO underpricing, that is, venture capital intensified the degree of IPO underpricing caused by R&D investment; (3) Joint investment does not exert network effects, but has more “adverse selection” effects, plus the type II of agency costs. The increase in the value of R&D investment has increased the uncertainty of the value of enterprises’ R&D investment, aggravated information asymmetry, and has led to higher IPO underpricing, that is, the intervention of joint investment increases the positive correlation between R&D investment and IPO underpricing; (4) The holding time of the leading venture capital cannot weaken the positive correlation between R&D investment and IPO underpricing, while the reputation of the leading venture capital can play a certain role. The higher the reputation of the leading venture capital, the higher the reputation pursuit. Motivation will be weakened, and its own high reputation can also play a role in value certification for invested companies, alleviate the information asymmetry caused by R&D investment, and reduce the positive correlation between R&D investment and IPO underpricing.
5.2. Suggestions
First, increase the degree of disclosure of R&D investment information. Under China’s current policies, companies simply disclose the amount of R&D investment and its percentage of operating income, and disclosure specific projects and current results less. This has led to an increase in information asymmetry between companies and external investors, and has intensified the degree of IPO underpricing of enterprises. Enterprises should disclose R&D information purposefully, provide sufficient R&D information, and reduce information asymmetry caused by R&D investment.
Second, when the invested company introduces joint investment, it should try its best to choose an investment institution with a higher reputation. In this way, the participation of venture capital can play a positive role in certification, alleviate the higher IPO underpricing caused by R&D investment in enterprises, and raise more funds for enterprises.
Third, increase the training of professional investment personnel. Draw lessons from foreign advanced management experience and talent training models. At the same time, the supervisory level should increase the regulation and management of existing practitioners, so that venture capital institutions can get rid of opportunism and give more play to their certification, and supervision and management functions.