The impact of management on under-pricing at IPO and subsequent initial stock trading

Farichah Farichah

International Journal of Business and Globalisation, 2018, vol. 20, issue 4, 509-518

Abstract: Can a company's management increase company's income prior to an initial public offering (IPO), for example, by hiring an underwriter and an auditor with high reputation? Does this result in under-pricing during the IPO? We study the influence of: 1) earnings management; 2) the underwriter's reputation; 3) the auditor's reputation on under-pricing and trading volume during the stabilisation period. The theoretical underpinnings of this research include agency theory, signalling theory and cognitive bias theory. The initial hypothesis is tested using an independent samples t-test comparing means. Other hypotheses are tested using ordinary least square regression. We find that prior to the IPO, a company's earnings management and the reputations of the underwriter and auditor do influence under-pricing while earnings management does not. Furthermore, under-pricing increases the trading volume during stabilisation period.

Keywords: auditor and underwriter reputation; earnings management; price stabilisation and under-pricing. (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inderscience.com/link.php?id=93590 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:ijbglo:v:20:y:2018:i:4:p:509-518

Access Statistics for this article

More articles in International Journal of Business and Globalisation from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().