They would like to thank an anonymous referee for helpful comments and suggestions.
Value Gains on Flotation and IPO Underpricing
Article first published online: 17 AUG 2006
Journal of Business Finance & Accounting
Volume 33, Issue 9-10, pages 1435–1459, November/December 2006
How to Cite
Hill, P. and Wilson, N. (2006), Value Gains on Flotation and IPO Underpricing. Journal of Business Finance & Accounting, 33: 1435–1459. doi: 10.1111/j.1468-5957.2006.00643.x
- Issue published online: 2 NOV 2006
- Article first published online: 17 AUG 2006
- (Paper received April 2003, revised version accepted May 2006. Online publication August 2006)
- private to public transition;
- value gain on listing;
- incentives to underprice
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.