Underpricing, Stock Allocation, Ownership Structure and Post-Listing Liquidity of Newly Listed Firms

By Peter K. Pham, P. Kalev, A. Steen. 2003

119 citations recorded by the source corpus.

This study investigates the relationship between underpricing, ownership structure and post-listing liquidity of initial public offerings (IPOs). It is argued that higher underpricing induces both broader investor participation and creates a more diffuse ownership structure. These two factors are in turn positively associated with the level of post-listing trading, and therefore offer an explanation of how underpricing can influence liquidity. Using a sample of Australian IPOs, we provide evidence of statistically significant relationship between underpricing and various proxies for shareholding distribution and liquidity. This result remains robust after controlling for a number of potential underlying factors that may drive both underpricing and ownership allocation decisions. Overall, our analysis suggests that liquidity is a partial but important benefit of underpricing an IPO.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/1dc06f7b10e4fdbcfecb3b8eedd200c241549898

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In Accounting

1. Nurwati A. Ahmad-Zaluki
2. Kevin Campbell
3. A. Goodacre
4. Salim Darmadi

In Finance

1. Nurwati A. Ahmad-Zaluki
2. Kevin Campbell
3. A. Goodacre

In Strategy and Management

1. Kevin Campbell
2. A. Goodacre

Citations in the corpus

• Earnings Management in Malaysian IPOs: The East Asian Crisis, Ownership Control and Post-IPO Performance (2011, background): “One way to alleviate such concerns is to allocate shares to many small investors through underpricing, thereby reducing both the threat of takeover and the monitoring by large block holders (Brennan & Franks, 1997; Pham et al., 2003; Alavi et al., 2008).”
• New low-frequency spread measures (2009, unknown): “Similarly, Dennis and Strickland (2003), Kalev et al. (2003), Cao et al. (2004), Lipson and Mortal (2004a), Schrand and Verrecchia (2004), Lesmond et al. (2005), and many others examine the impact of corporate finance events on stock liquidity.”
• Do Liquidity Measures Measure Liquidity (2009, unknown): “Kalev, Pham, and Steen (2003) , Dennis and Strickland (2003), Cao, Field, and Hanka (2004), Lipson and Mortal (2004a), Schrand and Verrecchia (2004), Lesmond, O’Connor, and Senbet (2008), and many others examine the impact of corporate finance events on stock liquidity.”