Journal of Financial Economics Vol. 65 No. 3 2002
Litigation risk and IPO underpricing
Abstract
We examine the relation between risk and IPO underpricing and test two aspects of the litigation-risk hypothesis: (1) firms with higher litigation risk underprice their IPOs by a greater amount as a form of insurance (insurance effect) and (2) higher underpricing lowers expected litigation costs (deterrence effect). To adjust for the endogeneity bias in previous studies, we use a simultaneous equation framework. Evidence provides support for both aspects of the litigation-risk hypothesis.
- DOI
- 10.1016/s0304-405x(02)00144-7
- Volume
- 65
- Issue
- 3
- Pages
- 309-335
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref