To mitigate the effect of underwriter bargaining power on IPO pricing through audit committee under an economy of little information asymmetry

Lanfeng Kao (), Min-Hsien Chiang () and Anlin Chen ()
Additional contact information
Lanfeng Kao: National University of Kaohsiung
Min-Hsien Chiang: National Cheng Kung University
Anlin Chen: National Sun Yat-Sen University

Review of Quantitative Finance and Accounting, 2024, vol. 63, issue 1, No 5, 147-167

Abstract: Abstract Chang et al. (Rev Financ Stud 30:835–865, 2017) attribute the underpricing of IPOs with little information asymmetry to agency costs resulting from the bargaining power of underwriters. In this study, we determine that a pre-IPO audit committee and auction method can reduce underwriter bargaining power, thereby improving IPO pricing efficiency. Auction method refrains underwriter discretion on IPO allocation. A pre-IPO audit committee or auction method does not raise IPO prices directly because there is little information asymmetry in Taiwan but does so indirectly by mitigating underwriter bargaining power. We determine that underwriters can save distribution efforts by lowering IPO offer price with their bargaining power before issuance to reduce costs. However, an effective audit committee can attenuate the negative effect of underwriter bargaining power on IPO prices.

Keywords: Auctioned method; Audit committee; IPOs; Pre-IPO market; Underwriter bargaining power (search for similar items in EconPapers)
JEL-codes: G18 G30 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11156-024-01271-7 Abstract (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:kap:rqfnac:v:63:y:2024:i:1:d:10.1007_s11156-024-01271-7

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-024-01271-7

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().