Value Gains on Flotation and IPO Underpricing

25 Pages Posted: 7 Dec 2006

See all articles by Paula Hill

Paula Hill

University of Bristol

Nick Wilson

University of Leeds - Credit Management Research Centre; Leeds University Business School

Abstract

Utilising a unique dataset of 502 UK IPOs we undertake an empirical analysis of the relationship between underpricing and value gains on flotation. We find support for our hypothesis that IPO underpricing is related to the extent of anticipated value gains on the private to public transition. We analyse alternative driving mechanisms behind this relationship, and our results suggest that the underpricing of IPOs is driven by both underwriters and issuing company directors, each of whom derive net benefits over the longer term from underpricing at the IPO.

Suggested Citation

Hill, Paula and Wilson, Nicholas, Value Gains on Flotation and IPO Underpricing. Journal of Business Finance & Accounting, Vol. 33, No. 9-10, pp. 1435-1459, November/December 2006, Available at SSRN: https://ssrn.com/abstract=950057 or http://dx.doi.org/10.1111/j.1468-5957.2006.00643.x

Paula Hill (Contact Author)

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

Nicholas Wilson

University of Leeds - Credit Management Research Centre ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

Leeds University Business School ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

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