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Underpricing in New Equity Listings: A Conceptual Re-appraisal

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  • Keasey, Kevin
  • McGuinness, Paul

Abstract

This paper appraises the existing approaches used to measure the underpricing of Initial Public Offerings (IPOs). The conceptual problems surrounding the measurement of IPO underpricing are noted to be significant and suggest that underpricing costs and returns may need to be evaluated with reference to the particular characteristics of individual offerings. For example, details of the number of primary shares on offer, the effect on corporate control of listing, the information effects resulting from listing, the liquidity of shares pre-offer, the impact of speculative activity on post-listing firm value and, finally, the actual dating of an IPO may all need to be considered. In short, the existing measures suggested for IPO underpricing do not allow managers/owners in IPO firms or investors in IPO stocks to assess, unequivocally, the respective costs and returns from underpricing in such issues. Copyright 1995 by Kluwer Academic Publishers

Suggested Citation

  • Keasey, Kevin & McGuinness, Paul, 1995. "Underpricing in New Equity Listings: A Conceptual Re-appraisal," Small Business Economics, Springer, vol. 7(1), pages 41-54, February.
    • Handle: RePEc:kap:sbusec:v:7:y:1995:i:1:p:41-54
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    Cited by:

    1. Adilah Azhari* & Hanita Kadir, 2018. "The Effects of Liquidity, Profitability and Board Characteristics on Debt Restructuring Likelihood Among Malaysian GLCs," The Journal of Social Sciences Research, Academic Research Publishing Group, pages 942-950:6.
    2. Eijgenhuijsen, Hans & Valk, Rob van der, 1997. "Initial public offerings in Mexico and Argentina: 1991-1994 Initial public offerings in Mexico and Argentina : 1991 - 1994," Serie Research Memoranda 0009, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.

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