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Underpricing in IPOs and the Effects of IPO Cyclicality and Owners ’ Investment Philosophy
| Content Provider | Semantic Scholar |
|---|---|
| Author | Andersson Jonatan, Kelber Rasmus, Enhörning |
| Copyright Year | 2016 |
| Abstract | We examine underpricing levels in initial public offerings (“IPOs”) using a sample consisting of 50 private equity-backed, 50 venture capital-backed and 113 non-sponsored IPOs. The sample is collected using offering data from firms listed on the UK Main Market, International Main Market and AIM on the London Stock Exchange, between the years of 2006-2015. We compute first day returns and compare the results between our three subgroups. Also, we measure the effect of IPO cyclicality and owners’ investment philosophy by comparing first day returns across subgroups in different periods of IPO activity and distinguishing between two types of owner focus, respectively. Our findings show that private equity-backed IPOs experience the lowest level of underpricing, followed by venture capital-backed IPOs. In periods of high market activity, venture capital-backed IPOs experience significantly higher levels of underpricing. Financially focused private equity firms achieve a lower level of underpricing than their operationally focused counterparts; the opposite is found to be true for venture capital firms. Our results substantiate the hot issue market theories and the relative power of participants in IPO deals, in a European equity market setting. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://arc.hhs.se/download.aspx?MediumId=2861 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
