Management ownership and IPO underpricing an empirical study of Singapore IPOs
Lim, Boon Hui
Tee, Sandy Chee Han
Vithayathil, Thomas Sebastian
Date of Issue2004
College of Business (Nanyang Business School)
This paper is an empirical study to verify the validity of certain aspects of IPO underpricing proposed by Aggarwal et al. (2002), in the Singapore IPO market between 1998 and 2002. We focus on testing the hypothesis that increased management ownership of the firm leads to increased first day IPO underpricing. We also examine if enhanced control through voting rights (Claessens et al., 2000) is positively related to first day IPO underpricing. In addition, we test for the validity of Beatty and Ritter's (1986) model that the greater the ex ante uncertainty about the value of an issue, proxied by the inverse of the gross proceeds, the greater is the expected underpricing; Finally, we explore the relationship between underwriter quality in terms of market share, and underpricing.
Nanyang Technological University