Published Online:July 2025
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARAP180725
DOI:10.71329/IUPJARAP/2025.24.3.370-392
Author Name:Samhitha Kasibhatta and Sudhakara Reddy Syamala
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:370-392
This paper studies the impact of venture capital (VC) syndication on the performance of IPOs, particularly with reference to voluntary and aftermarket underpricing, investor attention, valuation and initial day performance. Based on a review of social networks literature, it develops a measure for the cumulative centrality of VC syndicates. The Indian setting offers the advantage of transparency, thus enabling to examine investor attention by category, and also the actual underpricing voluntarily carried out by the underwriter. For this study, the sample consists of all IPOs in the Indian stock market from 2007-2020. The results reveal that an increase of 1% in VC network centrality causes an increase in underpricing by 0.0017%, which the underwriter voluntarily carries out. Though institutional investor attention is positively impacted, retail investor attention and initial day returns reduce in increasing the centrality of the backing syndicate. Secondary market valuation is positively impacted by VC network centrality. The results are robust to different definitions of centrality and other explanations.
Venture capital (VC) firms tend to syndicate their investments rather than invest alone. Syndication is defined as the process of a lead VC investor roping in other VC firms to invest in a company.