The Two-Tier Board System and Underpricing of Initial Public Offerings: Evidence from Austria

Corporate Ownership and Control,12: 352-362 (2014)

28 Pages Posted: 12 Aug 2014 Last revised: 8 Mar 2015

See all articles by Lalith P. Samarakoon

Lalith P. Samarakoon

University of St. Thomas

Palani-Rajan Kadapakkam

University of Texas at San Antonio - Department of Finance

Date Written: April 1, 2014

Abstract

We study the relation between initial IPO underpricing and two-tier board structure in the Vienna Stock Exchange of Austria, where a two-tier board is mandatory for listed companies. The board ratio, defined as the size of the supervisory board to the management board, is used to capture the effect of two-tiered board on underpricing. The results show that the board ratio is negatively related with underpricing, consistent with the agency theory which predicts that more effective monitoring implied in a relatively larger supervisory board will lead to lower agency costs, and thus lower underpricing. The results are robust to the inclusion of control variables and suggest that firms seeking to raise external capital will be helped by adopting strong corporate governance standards.

Keywords: IPO Underpricing, Austria, Two-tier Borads, Vienna Stock Exchange, Supervisory Board, Management Board, Agency Theory, Corporate Governance

JEL Classification: G15, G32, G34

Suggested Citation

Samarakoon, Lalith P. and Kadapakkam, Palani-Rajan, The Two-Tier Board System and Underpricing of Initial Public Offerings: Evidence from Austria (April 1, 2014). Corporate Ownership and Control,12: 352-362 (2014), Available at SSRN: https://ssrn.com/abstract=2478720 or http://dx.doi.org/10.2139/ssrn.2478720

Lalith P. Samarakoon (Contact Author)

University of St. Thomas ( email )

2115 Summit Ave
St. Paul, MN 55105
United States

HOME PAGE: http://business.stthomas.edu/faculty-research/faculty-bios/samarakoon-lalith/

Palani-Rajan Kadapakkam

University of Texas at San Antonio - Department of Finance ( email )

San Antonio, TX 78249
United States

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