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Signalling and the Valuation of Unseasoned New Issues Revisited

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  • Krinsky, I.
  • Rotenberg, W.

Abstract

This paper provides further empirical evidence on the relation between entrepreneurial ownership retention and the initial value of unseasoned common shares. A Canadian data set is employed to estimate the various empirical specifications used in previous studies and to examine additional variables suggested by recent developments in the theoretical literature. The estimation is carried out using a more general procedure to correct for heteroskedasticity. In contrast to previous findings, the entrepreneurial ownership retention signal does not possess statistical significance in any of the models examined.

Suggested Citation

  • Krinsky, I. & Rotenberg, W., 1989. "Signalling and the Valuation of Unseasoned New Issues Revisited," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(2), pages 257-266, June.
    • Handle: RePEc:cup:jfinqa:v:24:y:1989:i:02:p:257-266_01
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    1. Keasey, Kevin & McGuinness, Paul B., 2008. "Firm value and its relation to equity retention levels, forecast earnings disclosures and underpricing in initial public offerings in Hong Kong," International Business Review, Elsevier, vol. 17(6), pages 642-662, December.
    2. Koop, Gary & Li, Kai, 2001. "The valuation of IPO and SEO firms," Journal of Empirical Finance, Elsevier, vol. 8(4), pages 375-401, September.
    3. Kevin Keasey & Helen Short, 1997. "Equity retention and initial public offerings: the influence of signalling and entrenchment effects," Applied Financial Economics, Taylor & Francis Journals, vol. 7(1), pages 75-85.
    4. Denis Cormier & Daniel Coulombe & Luania Gomez Gutierrez & Bruce J. Mcconomy, 2018. "Firms in Transition: A Review of the Venture Capital, IPO, and M&A Literature," Accounting Perspectives, John Wiley & Sons, vol. 17(1), pages 9-88, March.
    5. Konrad, Kai A., 1991. "Taxation and risk taking in a capital market equilibrium with self-selection," EconStor Research Reports 112683, ZBW - Leibniz Information Centre for Economics.
    6. Aharony, Joseph & Falk, Haim & Lin, Chan-Jane, 1996. "Changes in ownership structure and the value of the firm: The case of mutual-to-stock converting thrift institutions," Journal of Corporate Finance, Elsevier, vol. 2(3), pages 301-316, February.
    7. Catherine M. Daily & S. Trevis Certo & Dan R. Dalton & Rungpen Roengpitya, 2003. "IPO Underpricing: A Meta–Analysis and Research Synthesis," Entrepreneurship Theory and Practice, , vol. 27(3), pages 271-295, July.
    8. Su, Dongwei, 2004. "Leverage, insider ownership, and the underpricing of IPOs in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 14(1), pages 37-54, February.
    9. Paul B. McGuinness, 2016. "Post-IPO performance and its association with subscription cascades and issuers’ strategic-political importance," Review of Quantitative Finance and Accounting, Springer, vol. 46(2), pages 291-333, February.
    10. Beat Reber & Bob Berry & Steve Toms, 2005. "Firm resources and quality signalling: evidence from UK initial public offerings," Applied Financial Economics, Taylor & Francis Journals, vol. 15(8), pages 575-586.
    11. McGuinness, Paul B., 2014. "IPO firm value and its connection with cornerstone and wider signalling effects," Pacific-Basin Finance Journal, Elsevier, vol. 27(C), pages 138-162.
    12. Beat Reber & Bob Berry & Steve Toms, 2005. "Predicting mispricing of initial public offerings," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 13(1), pages 41-59, March.
    13. Firth, Michael, 1997. "An analysis of the stock market performance of new issues in New Zealand," Pacific-Basin Finance Journal, Elsevier, vol. 5(1), pages 63-85, February.
    14. Sheela Sundarasen & Kamilah Kamaludin & Izani Ibrahim & Usha Rajagopalan & Nevi Danila, 2021. "Auditors, Underwriters, and Firm Owners’ Interaction in an IPO Environment: The Case of OECD Nations," Sustainability, MDPI, vol. 13(11), pages 1-13, June.
    15. Miglo, Anton, 2022. "Theories of financing for entrepreneurial firms: a review," MPRA Paper 115835, University Library of Munich, Germany.
    16. Peter M. Clarkson & Alex Dontoh & Gordon Richardson & Stephan E. Sefcik, 1991. "Retained ownership and the valuation of initial public offerings: Canadian evidence," Contemporary Accounting Research, John Wiley & Sons, vol. 8(1), pages 115-131, September.
    17. Heather Rhodes, 2018. "Asymmetric Information in the Market for IPOs," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 7(3), pages 01-19, July.
    18. Kim, Jeong-Bon & Krinsky, Itzhak & Lee, Jason, 1995. "The role of financial variables in the pricing of Korean initial public offerings," Pacific-Basin Finance Journal, Elsevier, vol. 3(4), pages 449-464, December.
    19. Krinsky, Itzhak & Thomas, Hugh, 1995. "Savings and loan ownership structure and expense-preference," Journal of Banking & Finance, Elsevier, vol. 19(1), pages 165-170, April.
    20. Keloharju, Matti & Kulp, Kaj, 1996. "Market-to-book ratios, equity retention, and management ownership in Finnish initial public offerings," Journal of Banking & Finance, Elsevier, vol. 20(9), pages 1583-1599, November.
    21. Wang, Zhuqing & Wang, Xinyu & Xu, Yan & Cheng, Qiuying, 2022. "Are green IPOs priced differently? Evidence from China," Research in International Business and Finance, Elsevier, vol. 61(C).
    22. Marco Cucculelli & Manuela Geranio & Camilla Mazzoli & Sabrina Severini, 2021. "IPO Pricing and Dealers’ Interaction: A Stochastic Frontier Approach," International Business Research, Canadian Center of Science and Education, vol. 14(1), pages 1-1, January.
    23. Firth, Michael & Liau-Tan, Chee Keng, 1997. "Signalling models and the valuation of new issues: An examination of IPOs in Singapore," Pacific-Basin Finance Journal, Elsevier, vol. 5(5), pages 511-526, December.

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