Unionization and IPO Underpricing

48 Pages Posted: 25 Jun 2018 Last revised: 14 Oct 2019

See all articles by Antonios Chantziaras

Antonios Chantziaras

Durham University; International Hellenic University (IHU) - School of Economics, Business Administration and Legal Studies

Dimitrios Gounopoulos

University of Bath

Stergios Leventis

International Hellenic University - School of Economics and Business Administration; International Hellenic University (IHU)

Date Written: October 10, 2019

Abstract

This paper investigates the impact of labor unionization on IPO underpricing. We demonstrate that the existence of unions reduces underpricing by 11.20%. Unionized IPOs are associated with downward offer-price revisions, higher cost of capital, inferior firm-operating performance, and incremental failure risk. We argue that union presence discourages investor participation, since investors discount the value of unionized IPOs. We conclude that labor unionization is an important factor in IPO pricing and first-day returns. Our findings are of particular interest to managers, labor unionists, and market participants.

Keywords: Initial Public Offerings, IPO Underpricing, Labor Unions, Unionization

JEL Classification: G10, G39, J50, J51

Suggested Citation

Chantziaras, Antonios and Gounopoulos, Dimitrios and Leventis, Stergios, Unionization and IPO Underpricing (October 10, 2019). Available at SSRN: https://ssrn.com/abstract=3193746 or http://dx.doi.org/10.2139/ssrn.3193746

Antonios Chantziaras

Durham University ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

International Hellenic University (IHU) - School of Economics, Business Administration and Legal Studies ( email )

14th km Thessaloniki - Moudania
Thermi, 57001
Greece

Dimitrios Gounopoulos (Contact Author)

University of Bath ( email )

School of Management,
Wessex House, Claverton Down
Bath, BA2 7AY
United Kingdom

Stergios Leventis

International Hellenic University - School of Economics and Business Administration ( email )

14th km Thessaloniki
Moudania
Thermi, Thessaloniki 57001
Greece

International Hellenic University (IHU) ( email )

14th km Thessaloniki
Moudania
Thermi, Thessaloniki 57001
Greece

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