Ownership Structure and IPO Underpricing

<link rid="b20">Stoughton and Zechner (1998)</link> and <link rid="b4">Brennan and Franks (1997)</link> argue that underpricing can be employed to determine post IPO ownership structure, and thereby to influence monitoring and/or control of the company post issue. This paper employs unique data relating to shareholdings of firms listing on the London Stock Exchange, and provides compelling evidence that IPO underpricing does "not" arise from efforts to determine the ownership structure of the post IPO firm. It is suggested that research is directed elsewhere to find an answer to the underpricing phenomenon, and for means other than IPO underpricing to affect post IPO ownership structure. Copyright Blackwell Publishers Ltd, 2006.