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Monitoring as a Motivation for IPO Underpricing
Author(s) -
ARUǦASLAN ONUR,
COOK DOUGLAS O.,
KIESCHNICK ROBERT
Publication year - 2004
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2004.00703.x
Subject(s) - initial public offering , incentive , sample (material) , business , ask price , accounting , monetary economics , financial economics , economics , finance , microeconomics , chemistry , chromatography
Brennan and Franks (1997) and Stoughton and Zechner (1998) provide contrasting arguments for why monitoring considerations create incentives for managers to underprice their firms' IPOs (initial public offerings). Like Smart and Zutter (2003), we examine these arguments using a sample of U.S. IPOs. However, we find evidence that the determinants of initial returns, institutional shareholdings, and post‐IPO likelihood of acquisition are not consistent with these arguments. Thus, we conclude that monitoring considerations are not important determinants of IPO underpricing.