The Contrasting Effects of Board Composition and Structure on IPO Firm Underpricing in a Developing Context

29 Pages Posted: 12 Dec 2010 Last revised: 20 Nov 2012

Date Written: December 11, 2010

Abstract

This study investigates the impact of board governance features and the presence of foreign, indigenous high society executives and board diversity on levels of IPO underpricing in a unique sample of 62 Initial Primary Offerings (IPOs) from across Sub Saharan African (SSA), excluding South Africa. I find evidence that greater numbers of foreign executives increase underpricing while higher numbers of indigenous high society directors have an opposing effect. Increasing board ethnic and nationality diversity together with the establishment of nominally independent board monitoring and oversight committees are associated with higher underpricing implying that standard international governance best practice is inappropriate in a developing region dominated by narrow political economies underscored by underdeveloped formal institutions with minimal investor protection

Keywords: Corporate Governance, IPO, Underpricing, Agency Theory, Africa

Suggested Citation

Hearn, Bruce Allen, The Contrasting Effects of Board Composition and Structure on IPO Firm Underpricing in a Developing Context (December 11, 2010). International Review of Financial Analysis, Vol. 21, 2012. Available at SSRN: https://ssrn.com/abstract=1723837 or http://dx.doi.org/10.2139/ssrn.1723837

Bruce Allen Hearn (Contact Author)

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

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