Is underpricing a deliberate choice? Evidence from Germany

摘要: This study tests whether underpricing is subject to the controlling shareholder group's discretion in a sample of German IPOs from 1997 2002. question important since previous researchers (Allen and Faulhaber (1989), Welch (1998), Grinblatt Hwang Brennan Franks (1997) others) have relied on assumption that deliberate choice. Regression results indicate control by insiders has positive impact underpricing. Additionally, if are control, relative marginal costs borne them negative extent In contrast, for outside block holders, no significant relation exists. paper introduces issuer's insurance hypothesis as potential explanation this result. These findings robust 3SLS estimation cost underpricing, also different definitions control. Furthermore, simultaneous at IPO, suggesting adapt an expected level Overall, trading off with its costs, which implies choice ownership issues matter