Pre-IPO Insider Ownership and Underpricing: High-Tech Versus Low-Tech IPOs

Financial Decisions, 2009

Posted: 16 Jan 2009

See all articles by Kuntara Pukthuanthong

Kuntara Pukthuanthong

University of Missouri, Columbia

Thomas John Walker

Concordia University, Quebec - Department of Finance

Date Written: January 13, 2009

Abstract

Using data for 2,391 non-financial firm commitment initial public offerings (IPOs) between January 1996 and December 2002, we examine the relation between pre-IPO insider ownership and underpricing for high-tech and low-tech IPOs. Contrary to the conventional wisdom that suggests that firms in which insiders retain a higher proportion of insider ownership are generally less risky and thus less underpriced, we find that the relationship between insider ownership and underpricing differs between low- and high-tech firms. When high underpricing is expected, insiders of high-tech IPOs retain a high percentage of pre-IPO ownership. The opposite is observed for low-tech IPOs. To adjust for endogeneity biases, we use a simultaneous equations framework.

Keywords: Initial Public Offerings, Insider Ownership

JEL Classification: G24, G32, G39

Suggested Citation

Pukthuanthong, Kuntara and Walker, Thomas John, Pre-IPO Insider Ownership and Underpricing: High-Tech Versus Low-Tech IPOs (January 13, 2009). Financial Decisions, 2009, Available at SSRN: https://ssrn.com/abstract=1326778

Kuntara Pukthuanthong (Contact Author)

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: https://www.kuntara.net/

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

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