Booth and Chua (1996) hypothesize that IPOs are underpriced to promote ownership dispersion, which in turn increases aftermarket liquidity of IPO stocks. We examine a sample of 1,179 Nasdaq IPOs and find that underpricing is positively correlated with the number of non-block institutional...

We propose reduced investment as a potential explanation for why firms with internal control weakness (ICW) exhibit lower valuation relative to non-ICW firms. We show that ICW firms significantly reduce investment around ICW disclosure and also have poor stock performance. Additional evidence...

We examine why many firms disclose internal control weaknesses (ICW) under section 404 of Sarbanes-Oxley Act after previously reporting effective internal control (IC). We find that about half of the cross-sectional ICW determinant variables either do not change significantly from Year T-1 to...

We examine the decision to list in the U.S. markets by foreign firms through American Depository Receipts (ADRs). There is a high positive correlation between the valuation of existing ADRs and the number of new ADR listings next year. ADR listing is more likely when existing ADRs are valued...

We examine private issuance of public equity (PIPE) in China, and our results suggest that PIPE investors benefit from the price manipulation before and after issuance. These investors tend to cash out after lockup expiration and make large profits. We also find evidence that the trading of PIPE...

We find that firms reporting internal control material weakness (ICW) under Section 404 of Sarbanes-Oxley Act have 13% lower valuation than non-ICW firms based on Tobin's q. This valuation difference is mainly driven by stock underperformance of more than 13% during the year before ICW...

We examine the information content of changes in shareholdings after private issuance of public equity (PIPE) by mutual funds that participate in PIPEs in China. The results show that the changes in shareholdings are positively related to alpha and cumulative abnormal return (CAR) for PIPE...

Assuming that initial public offering (IPO) issuers can value their own firms more accurately, we test the hypothesis that the stock markets tend to overvalue IPOs. Using the lower limit of initial filing price range as issuers' reservation price, we estimate the premiums of IPO first day...

In this paper we examine the relationship between IPO analyst forecasts and two key IPO characteristics: retention and underpricing. We find that analysts predict higher long-term growth rates for IPOs with higher retention and/or higher underpricing. Analysts revise their growth forecasts...

This paper proposes that in an initial public offering (IPO), pre-IPO owners make decisions regarding share retention, share lockup, and underpricing to improve liquidity, which in turn increases the value of shares they retain. We suggest that underpricing will increase the number of investors...