Search results

1 – 10 of 177
Article
Publication date: 17 June 2008

Thomas Walker

We study the relationship between underwriter prestige, family control, and IPO underpricing in an international setting. Data are collected for 5,789 firms that went…

Abstract

We study the relationship between underwriter prestige, family control, and IPO underpricing in an international setting. Data are collected for 5,789 firms that went public across twenty‐five countries between 1995 and 2002. We find that non‐penny‐stock and non‐U.S. IPOs from countries where firms are predominately family‐controlled benefit from associations with well‐known investment bankers; i.e., these firms are less underpriced than similar firms from countries with a low level of family control. At the same time, our findings support prior evidence that suggests that underwriter prestige is positively related to underpricing in the U.S. IPO market. Family‐controlled firms should consider the findings of this study, which identifies factors that are associated with more successful IPO outcomes.

Details

Multinational Business Review, vol. 16 no. 2
Type: Research Article
ISSN: 1525-383X

Keywords

Book part
Publication date: 19 April 2011

Ari Ginsberg, Iftekhar Hasan and Christopher L. Tucci

Prior research underscores the critical role of prestigious underwriters in shaping the success of the initial public offering (IPO) process, particularly for young firms…

Abstract

Prior research underscores the critical role of prestigious underwriters in shaping the success of the initial public offering (IPO) process, particularly for young firms that do not have much of a track record. Recent scholarly work has shown that the likelihood of a start-up securing a lead prestigious underwriter is influenced by its ability to provide important signals of organizational legitimacy, as conveyed in the employment experiences of the firm's top management team. Building further on theories of organizational attention and decision making, this chapter seeks to examine whether lead prestigious underwriters also consider different types of signals of organizational legitimacy that might be suggested by the existence of ties between young firms and corporate venture capital (CVC) investors.Analysis of 1830 IPOs during 1990–1999 indicates that having a tie to CVC investor provides added legitimacy value over that provided by independent venture capital investors alone. Further analysis of 315 IPOs affiliated with CVC investors suggests that prestigious underwriters pay attention primarily to endorsement-rather than resource-related signals of legitimacy when it comes to CVC ties, and that they pay more attention to investment screening prominence than to business management prominence when it comes to endorsement legitimacy. We also found that prestigious underwriters pay more attention to signals of IPO legitimacy provided by CVC investment in IPO markets that are hot than those that are cold. Our findings provide important theoretical extensions to the study of the certification value of interorganizational affiliations and its impact on IPO success.

Article
Publication date: 17 April 2007

Dimitris F. Kenourgios, Spyros Papathanasiou and Emmanouil Rafail Melas

This paper aims to provide additional international evidence on the initial public offerings (IPOs) by examining the initial performance and two main determinants of…

1758

Abstract

Purpose

This paper aims to provide additional international evidence on the initial public offerings (IPOs) by examining the initial performance and two main determinants of short‐run underpricing of 169 IPOs listed on the Athens Stock Exchange (ASE) over the period 1997‐2002.

Design/methodology/approach

In the first stage, the initial performance of the IPOs is measured by two calculated formulas: the raw returns and the excess or adjusted returns of the first, fifth and 21st day, respectively. In the second stage, a proxy is used to rank the underwriters' prestige along with the times of oversubscription, which are introduced as explanatory variables in the model.

Findings

The results of the analysis on the initial performance of the IPOs provide evidence of significant underpricing. Furthermore, the cross‐sectional analysis on the determinants of the IPOs shows that both the underwriters' prestige and the times of oversubscription significantly affect the underpricing level of the IPOs. Research limitations/implications – To understand the Greek IPO market with further depth, future studies could shed light on the other hypotheses emerging from the finance literature to explain the underpricing phenomenon.

Practical implications

This paper helps investors and issuers to understand the role of an underwriter's reputation into the Greek going public process and the underpricing phenomenon and supports that the oversubscription is a pure signal to the investors that the shares are underpriced. Originality/value – This paper presents further evidence on the underpricing of the Greek IPOs, while extending previous relative studies by providing an explanation of this phenomenon over the most important and “hot” period for the Greek emerging stock market since its establishment, in terms of growth rates, acceleration of the going public process and volatility of market and stock returns.

Details

Managerial Finance, vol. 33 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 12 October 2012

Gonul Colak

The purpose of this paper is to investigate the initial public offerings (IPOs) of the firms that are eventually included in one of the S&P 400, the S&P 500, or the S&P…

1261

Abstract

Purpose

The purpose of this paper is to investigate the initial public offerings (IPOs) of the firms that are eventually included in one of the S&P 400, the S&P 500, or the S&P 600 Indices. Do these firms have very different IPO features than the rest of the IPOs?

Design/methodology/approach

The control sample is formed of IPOs that are not included in the corresponding index, and the IPOs that end up in each S&P index are compared to this control sample. Logistic regressions are utilized to estimate the odds of inclusion into one of these indices.

Findings

The author finds that the IPO features, such as underpricing, offer price, underwriter's reputation, venture capital presence, and so on, are found to be substantially different for the index samples. The index firms are found to be “superstars” that deliver extremely high long‐run returns between their IPO date and their index inclusion date. The above results suggest that the quality of index firms has a persistent component to it that can be detected even during the IPO process. After estimating the determinants of the index inclusion, the author discovers that factors implying lower asymmetric information about firm's business (such as, the firm being a spinoff, or being certified by a venture capitalist or a prestigious underwriter, etc.) increase its odds of inclusion.

Originality/value

The paper proposes and tests two new hypotheses related to inclusion into an S&P index. Discoveries made in this paper can help someone recognize which IPOs could become “superstars” that end up in an S&P index.

Details

Managerial Finance, vol. 38 no. 12
Type: Research Article
ISSN: 0307-4358

Keywords

Book part
Publication date: 10 November 2004

Georg Rindermann

This chapter investigates the impact of venture capitalists on the operating and market performance of firms going public on the French Nouveau Marché, the German Neuer…

Abstract

This chapter investigates the impact of venture capitalists on the operating and market performance of firms going public on the French Nouveau Marché, the German Neuer Markt and the British techMARK. Considering different variables that reflect the quality of venture-backing, the findings suggest that venture-backed firms do not generally outperform those without venture-backing. However, a subgroup of internationally operating venture capitalists has positive effects on the performance of portfolio firms. The outcome is interpreted as evidence of heterogeneity among venture capitalists in the European market.

Details

The Rise and Fall of Europe's New Stock Markets
Type: Book
ISBN: 978-0-76231-137-8

Article
Publication date: 1 January 2002

Jarrod Johnston and Jeff Madura

Roll‐up initial public offerings (IPOs) create a company to consolidate a number of smaller companies in a fragmented industry. The company that results has limited…

Abstract

Roll‐up initial public offerings (IPOs) create a company to consolidate a number of smaller companies in a fragmented industry. The company that results has limited operational experience and must combine several small and diverse companies. These characteristics may increase the uncertainty of the offer. We find that roll‐up IPOs have higher initial returns than traditional IPOs, implying additional uncertainty. Additionally, roll‐up IPOs do not perform as poorly as other IPOs over the long run. This may be due to benefits from economies of scale and a higher degree of monopoly power.

Details

Studies in Economics and Finance, vol. 20 no. 1
Type: Research Article
ISSN: 1086-7376

Article
Publication date: 6 May 2017

Monica B. Fine, Kimberly Gleason and Michael Mullen

Increasingly, marketing managers are asked to consider the financial implications, in terms of both book and market values, when making strategic decisions. The purpose of…

1499

Abstract

Purpose

Increasingly, marketing managers are asked to consider the financial implications, in terms of both book and market values, when making strategic decisions. The purpose of this paper is to investigate the role of marketing expenditures in explaining the variation in the aftermarket performance of a sample of firms conducting initial public offerings (IPOs).

Design/methodology/approach

Theories from marketing and finance – market-based assets (MBA) theory and signaling theory respectively – serve as the conceptual basis of this paper. The results of this study, based on a sample of 2,103 IPOs covering the 1996 to 2008 time period, suggest that increased marketing spending positively impacts aftermarket (i.e. stock price) performance.

Findings

The authors find that while short-run aftermarket performance is positively and significantly impacted by pre-IPO marketing spending, long-run firm performance measures do not appear to be impacted by pre-IPO marketing spending. Further, pre-IPO marketing spending does not incrementally reduce underpricing or improve long-run performance when the IPO takes place during extreme market conditions such as recessions or hot markets, and these results are important to the shareholders and potential investors in the firm.

Research limitations/implications

Theoretically this paper advances the literature on the marketing-finance interface by extending the MBA and signaling theories. For practice, the results indicate that spending more money on marketing before the IPO and disclosing this information produces positive bottom-line results for the firm.

Originality/value

While Luo (2008) documents a significant relationship between the firms’ pre-IPO marketing spending and IPO underpricing, few studies explore the impact of marketing spending on stock price performance beyond the first day of trading. This paper makes three unique contributions. First, the authors extend Luo’s study by investigating the effect of marketing expenditures on underpricing during extreme market conditions. Second, the authors are the first to examine IPO performance in the long-run as well as the short-run. Finally, the authors assess how long-run performance is impacted by marketing spending during extreme market conditions. The findings of this study has implications for managers and shareholders of firms considering going public through a traditional IPO.

Details

Marketing Intelligence & Planning, vol. 35 no. 4
Type: Research Article
ISSN: 0263-4503

Keywords

Article
Publication date: 14 May 2018

Imen Derouiche, Syrine Sassi and Narjess Toumi

The purpose of this paper is to investigate the effect of the control-ownership wedge of controlling shareholders (excess control) on the survival of French initial public…

Abstract

Purpose

The purpose of this paper is to investigate the effect of the control-ownership wedge of controlling shareholders (excess control) on the survival of French initial public offerings (IPOs).

Design/methodology/approach

This paper studies a large sample of 434 French IPOs. The empirical analysis uses the Cox proportional hazard and accelerated-failure-time models. Data are manually gathered from IPO prospectuses.

Findings

The findings support a positive relation between the control-ownership wedge and IPO survival time, indicating that survival is more likely in firms with high excess control levels. This result is consistent with the view that controlling shareholders with a large control-ownership wedge have incentives to preserve their private benefits of control by increasing firm survival chances. The findings also show that older IPOs are more likely to survive, while riskier and underpriced IPOs are more likely to delist.

Practical implications

The results provide a better understanding of the role of excess control in IPO survival. They also enrich the debate on the efficiency of the one-share-one-vote rule.

Originality/value

The research provides new insights into the role of agency conflicts in IPO survivability. In particular, it explores the effect of dominant shareholders with a control-ownership wedge on survival time.

Details

Journal of Applied Accounting Research, vol. 19 no. 2
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 30 July 2019

Ali Albada, Soo-Wah Low and Othman Yong

The purpose of this paper is to examine the effects of prestige signals measured by the reputations of the underwriter, auditor and board size on the heterogeneity of…

Abstract

Purpose

The purpose of this paper is to examine the effects of prestige signals measured by the reputations of the underwriter, auditor and board size on the heterogeneity of investor belief about the true value of IPO in the Malaysian IPO market.

Design/methodology/approach

This study employs a sample of 281 IPOs issued between January 2000 and December 2015. The relationship between prestige signals and investor heterogeneity, measured by first-day price range of IPOs, is analysed using cross-sectional regression and quantile regression technique.

Findings

Of the three prestige signals, the findings show that only underwriter reputation and board size have significant negative relationships with IPO first-day price range. This implies that IPOs underwritten by reputable underwriters and issuing firms with larger board members have lower heterogeneity of opinion among investors. The findings also show that underwriter and auditor reputations have negative relationship with IPO initial return, suggesting that these prestige signals help to reduce IPO under-pricing, which is a direct cost of raising capital for the issuing firm. Furthermore, the results indicate that offer price, initial return, over-subscription ratio and private placement are associated with higher first-day price range. However, the findings on offer size suggest that larger IPO offer size is associated with lower first-day price range. Overall, the findings suggest that firm’s prestige signals reduce opinion heterogeneity among investors and that lower investors’ heterogeneity leads to lower IPO under-pricing cost for issuing firms.

Originality/value

Despite the importance of underwriter, auditor and board member reputations in signalling firm’s quality and reducing the level of information asymmetry of the listing firm’s issues, research on the effects of prestige signals on investor heterogeneity remains unexplored. This study investigates the role of prestige signals in influencing investors’ heterogeneity in Malaysia. The authors conjecture that underwriter, auditor and board member with higher reputations are associated with lower levels of opinion heterogeneity among IPO investors.

Details

International Journal of Emerging Markets, vol. 15 no. 2
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 12 April 2019

Ali Albada, Othman Yong and Soo-Wah Low

The purpose of this paper is to examine whether initial public offering (IPO) over-subscription is a function of firm’s prestige signals conveyed by third parties with…

Abstract

Purpose

The purpose of this paper is to examine whether initial public offering (IPO) over-subscription is a function of firm’s prestige signals conveyed by third parties with reputational capital such as underwriter, auditor and independent non-executive board member.

Design/methodology/approach

The relationship between prestige signals and over-subscription ratio (OSR) of IPOs is analysed using a cross-sectional regression based on a sample of 393 IPOs issued between January 2000 and December 2015.

Findings

The results indicate that IPOs underwritten by reputable underwriters have lower OSR than those underwritten by non-reputable underwriters. While issuer engages reputable underwriter to certify firm quality to reduce information asymmetry, the action brings with it lower initial returns for its IPO. Investors interpret the signal conveyed by issuer’s choice of underwriter from under-pricing perspective and respond accordingly by reducing IPO demand. This implies that investors regard under-pricing as a more valuable signal than firm quality signal associated with underwriter reputation. The findings also indicate that over-subscription increases in IPOs that have above average initial returns and higher institutional participation. Issuing firms that go public in a period of high IPO volume are associated with low OSR.

Originality/value

This is the first paper to examine the relationship between the prestige signals and OSR of IPOs in the Malaysian context.

Details

International Journal of Managerial Finance, vol. 15 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

1 – 10 of 177