Journal of Business Finance and Accounting
IPO underpricing has been extensively studied; however, its impact on the wealth of preexisting shareholders has not been closely examined. We address the question of whether or not periods of high underpricing adversely affect preexisting shareholders. We find that high levels of underpricing are associated with increased share retention, which effectively offsets much of the potential cost. Overall, we find that the percentage of shareholder wealth lost is surprisingly stable over time, unlike underpricing itself. We also find that many factors known to be related to underpricing are not significant determinants of the cost of going public to preexisting owners.
This is an electronic copy of an article originally published in the Journal of Business Finance & Accounting. Archived with permission. The author(s) reserves all rights.
Dolvin, Steven D. and Jordan, Bradford D., "Underpricing, Overhang, and the Cost of Going Public to Preexisting Shareholders" (2008). Scholarship and Professional Work - Business. 49.