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The Underpricing of Insurance IPOs


  • We thank Michael Adams, Kenneth Carow, Doug Cook, Marsha James, Travis Jones, Yong-Duck Kim, Junsoo Lee, Qin Lian, Harris Schlesinger, William Christie (the editor), an anonymous referee, and participants at the 2005 World Risk and Insurance Congress for comments on prior drafts. We thank Dan Bradley for code related to classifying high-tech firms and Jay Ritter for the data generously provided through his web site. Remaining errors are our own.


The previous literature documents that insurance initial public offerings (IPOs) are less underpriced than those of noninsurance firms. This difference is usually attributed to lower information asymmetry for regulated firms. However, we find that once one controls for the file price adjustment insurance IPOs, both stock and mutual, are no less underpriced than other noninsurance offerings suggesting the book-building process resolves any such information asymmetries. We also find that mutual IPOs appear more underpriced than stock insurance IPOs, but this difference is related to the differences in pre-issue managerial ownership.

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