Espenlaub, S., Mohamed, A. orcid.org/0000-0002-2974-9467 and Saadouni, B. (2024) Underwriter incentives and IPO pricing. Journal of Corporate Finance, 87. 102625. ISSN 0929-1199
Abstract
We examine the impact of incentive fees paid to IPO underwriters at issuers' discretion on IPO pricing and short-term performance. We expect that better-incentivized underwriters produce more information required for IPO pricing reducing underwriters' reliance on investors' information production which requires compensation through IPO underpricing. Using a novel dataset, we find that incentive compensation mitigates the partial-adjustment phenomenon. IPOs with stronger incentives have more informative price ranges, higher price revisions, longer road shows and lower initial returns largely due to interaction effects between underwriters' incentives and their information-production capabilities. Using a battery of tests and addressing endogeneity, our results remain robust.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2024 The Authors. This is an open access article under the terms of the Creative Commons Attribution License (CC-BY 4.0), which permits unrestricted use, distribution and reproduction in any medium, provided the original work is properly cited. |
Keywords: | Incentive compensation, Information production, Initial public offering (IPO), Underwriting, Partial-adjustment phenomenon, Price revision, Road show |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 08 Jul 2024 16:24 |
Last Modified: | 06 Aug 2024 10:05 |
Status: | Published |
Publisher: | Elsevier |
Identification Number: | 10.1016/j.jcorpfin.2024.102625 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:214487 |