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8) As no significant relation is found between ownership concentration and underpricing, we cannot support the opposite theory of Stoughton and Zechner (1998), who suggest that IPO firms underprice their stocks at issuance to create a more concentrated ownership structure.
The results show that, listing delay is negatively related to underpricing implying that the IPOs that take more time to list after the offering underprice less as compared to those for which the gap between offer and listing is less.
Listing delay has a negative effect on underpricing, that is, the firms with larger time gap between offer and listing tend to underprice more; however a positive effect of listing delay on long-run performance suggests that firms with larger delay have better performance in the long-run.
9) These theories suggest that governments deliberately underprice GOC IPOs to achieve political objectives such as wider stock ownership, support for the privatization program and increased probability of re-election.
In addition, Perotti and Guney (1993) argue that underpricing signals commitment because an uncommitted government cannot expect higher proceeds from a subsequent sale, and is therefore not willing to underprice the initial sale.
4,5) The results are consistent with the notion that diversified firms underprice less than focused firms.
In response to a higher assessed threat, managers can underprice more at the margin in an attempt to reduce the post-IPO concentration of outside share ownership and the likelihood of an unwanted turnover in control.
Before discussing the analyst lust and spinning hypotheses in more detail, we explain why underwriters want to underprice.
Several reasons have recently been proposed in the literature to explain why a firm would willingly underprice its securities and limit the funds it receives.
Alexander's claim that small IPOs bear little litigation risk contradicts Tinic's |17~ rationale of why small firms underprice their IPOs more than larger firms.
In particular, firms with favorable private information underprice their initial offering, and because there is a positive probability that true firm quality will be exogenously revealed prior to a subsequent sale, it is costly for low quality firms to mimic them.
This implies that firms listing on trading systems with higher standards need to underprice less.