Document Type

Article

Publication Date

2008

Publication Title

Journal of Business Finance and Accounting

First Page

434

Last Page

458

DOI

http://dx.doi.org/10.1111/j.1468-5957.2008.02087.x

Abstract

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.

Rights

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.

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