Board ownership and IPO returns

This study examines the role of the board of directors for IPO pricing irregularities. Theory suggests taht initital underpricing may be the result of asymmetric information and the long-run underperformance may be the result of managerial mismanagement of new funds due to agency conflicts. A strong...

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Journal Title: Journal of economics and finance Vol. 25; no. 1; pp. 100 - 114
Authors: Shawn D. Howton, Shelly W. Howton, Gerard T. Olson
Format: Article
Published: Spring 2001
Subjects:
Summary: This study examines the role of the board of directors for IPO pricing irregularities. Theory suggests taht initital underpricing may be the result of asymmetric information and the long-run underperformance may be the result of managerial mismanagement of new funds due to agency conflicts. A strong board of directors can potentially reduce both asymmetric information and agency problems . It is found that the structure of the board is related to IPO pricing anomalies. Initial returns are directly related to share ownership by insiders and the percentage of independent outsiders, and long-run returns are directly related to share ownership by insiders.
ISSN: 1055-0925