Unionization and IPO Underpricing

59 Pages Posted: 25 Jun 2018  

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: June 10, 2018

Abstract

This paper investigates the impact of labor unionization on IPO underpricing. We demonstrate that the existence of unions reduces underpricing by 10.91%. Unionized IPOs are associated with downward offer-price revisions, lower aftermarket volatility, inferior firm performance, and incremental failure risk. We argue that unions’ presence discourages investor participation and investor demand for IPOs. Further, by employing Right-to-Work laws as an exogenous variation in the strength of labor unions, we determine that the effect that unions have on first-day returns is more noticeable in areas with incremental union power. 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 (June 10, 2018). 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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