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Journal of Finance Vol. 59 No. 5 2004

Monitoring as a Motivation for IPO Underpricing

ONUR ARUǦASLAN; Douglas O. Cook1; Robert L. Kieschnick2,3

1 University of Alabama · 2 Onur Aruǧaslan is from Western Michigan University, Douglas O. Cook is from the University of Alabama and Robert Kieschnick is from the University of Texas at Dallas. The authors wish to thank an anonymous referee, Rick Green (the editor), Ted Day, Larry Merville, Suresh Radhakrishnan, Scott Smart, · 3 Finance and Managerial Economics

Abstract

Brennan and Franks (1997) and Stoughton and Zechner (1998) provide contrasting arguments for why monitoring considerations create incentives for managers to underprice their firms' IPOs (initial public offerings). Like Smart and Zutter (2003) , we examine these arguments using a sample of U.S. IPOs. However, we find evidence that the determinants of initial returns, institutional shareholdings, and post‐IPO likelihood of acquisition are not consistent with these arguments. Thus, we conclude that monitoring considerations are not important determinants of IPO underpricing.

DOI
10.1111/j.1540-6261.2004.00703.x
Volume
59
Issue
5
Pages
2403-2420
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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