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Board ownership and IPO returns

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Abstract

This study examines the role of the board of directors for IPO pricing irregularities. Theory suggests that initial underpricing may be the result of asymmetric information and the long-run underperformance may be the result of managerial mismanagement of new funds due to agency conflicts. A strong board of directors can potentially reduce both asymmetric information and agency problems. We find that the structure of the board is related to IPO pricing anomalies. Initial returns are directly related to share ownership by insiders and the percentage of independent outsiders, and long-run returns are directly related to share ownership by insiders.

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Authors and Affiliations

  1. Department of Finance, Villanova University, 19085, Villanova, PA

    Shawn D. Howton, Shelly W. Howton & Gerard T. Olson

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  1. Shawn D. Howton
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  2. Shelly W. Howton
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  3. Gerard T. Olson
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Correspondence to Shawn D. Howton.

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Howton, S.D., Howton, S.W. & Olson, G.T. Board ownership and IPO returns. J Econ Finan 25, 100–114 (2001). https://doi.org/10.1007/BF02759689

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