Value Gains on Flotation and IPO Underpricing


  • They would like to thank an anonymous referee for helpful comments and suggestions.

* Address for correspondence: Paula Hill, Leeds University Business School, University of Leeds, Leeds LS2 9JT, UK.


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.