The first and second authors are respectively, Senior Lecturer of Finance, and Professor of Accounting and Finance at the University of Hull. The third author is Professor of Accounting and Finance at Nottingham Trent University. They wish to thank Steve Tuplin for his assistance in the collection of data and are also indebted to the anonymous referee who provided valuable comments on an earlier draft of this paper.
UNSEASONED EQUITY OFFERINGS MBO-IPOs vs NON-MBO-IPOs
Version of Record online: 7 DEC 2006
Journal of Business Finance & Accounting
Volume 23, Issue 1, pages 47–61, January 1996
How to Cite
Saadouni, B.S., Briston, R.J. and Mallin, C.A. (1996), UNSEASONED EQUITY OFFERINGS MBO-IPOs vs NON-MBO-IPOs. Journal of Business Finance & Accounting, 23: 47–61. doi: 10.1111/j.1468-5957.1996.tb00401.x
- Issue online: 7 DEC 2006
- Version of Record online: 7 DEC 2006
- (Paper received February 1994, accepted July 1995)
- management buyouts;
- information asymmetry;
In this paper we examine the degree of under-pricing of two different types of unseasoned equity offerings (IPOs), namely MBO-IPOs and non-MBO-IPOs. Since, MBO-IPOs were previously subsidiaries or divisions of publicly listed companies which were taken private by a group of managers and then reverted back to public ownership; there should be a lower level of information asymmetry between the market on the one hand and the company and its underwriters on the other. Thus, if under-pricing is mainly the result of uncertainty about the market value of the issuing firm, the information asymmetry hypothesis would predict that, compared with the non-MBO-IPOs, MBO-IPOs should exhibit a significantly lower degree of under-pricing. The results show that MBO-IPOs are less under-priced than non-MBO-IPOs. However, the difference is not statistically significant.