Underpricing of Banks in Intermediary-Oriented Marketplaces: A Test of Baron’s Model on the Italian Market

Posted: 24 Dec 2010

See all articles by Maria-Gaia Soana

Maria-Gaia Soana

University of Parma

Massimo Regalli

University of Parma - Dipartimento di Economia

Date Written: December 22, 2010

Abstract

Baron’s model shows that underpricing results from asymmetrical information between the issuer and underwriters. Muscarella and Vetsuypens’ test on the validity of Baron’s theory in the US market shows no significant results. However, the model may partially explain underpricing in countries strongly oriented towards financial intermediaries, and was thus tested empirically on the Italian market. We find that the underpricing of self-underwritten offerings by banks is lower than that by other firms and that information asymmetry between issuer and intermediary may be a reason for underpricing.

Keywords: Baron’s theory, underpricing, IPOs, banks

JEL Classification: G14, G21, G24

Suggested Citation

Soana, Maria-Gaia and Regalli, Massimo, Underpricing of Banks in Intermediary-Oriented Marketplaces: A Test of Baron’s Model on the Italian Market (December 22, 2010). Available at SSRN: https://ssrn.com/abstract=1729807 or http://dx.doi.org/10.2139/ssrn.1729807

Maria-Gaia Soana (Contact Author)

University of Parma ( email )

Via Kennedy 6
Parma, 43100
Italy

Massimo Regalli

University of Parma - Dipartimento di Economia ( email )

Via Kennedy 6
Parma, Parma 43100
Italy

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