The Role of Industry Affiliation in the Underpricing of U.S. IPOs

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The Role of Industry Affiliation in the Underpricing of U.S. IPOs

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Title: The Role of Industry Affiliation in the Underpricing of U.S. IPOs
Author: Henrick, Bryan C.
Advisor: Ghosh, Indradeep
Department: Haverford College. Dept. of Economics
Type: Thesis (B.A.)
Issue Date: 2012
Abstract: This paper examines the significance of a firm’s industry affiliation on the underpricing of its Initial Public Offering (IPO). A Probit method is conducted on U.S. IPOs from 2001-2011 to determine how the predicted probability of experiencing an underpriced IPO differs across industries. The effect of a firm’s industry affiliation is a found to be a key influence on the underpricing of its IPO, as firms in both the technology and consumer services industries exhibit a higher predicted probability of undergoing an underpriced IPO. The effect for the technology industry seems to have existed throughout the 2000s, while the consumer services industry seems to have its effect concentrated in the years following the 2008 Financial Crisis. Moreover, IPOs in the post crisis years are found to be less likely to be underpriced than those in the pre-crisis years. Consequently, it seems that investors view both the technology and consumer services industries as carrying an innate risk that is independent of the macro environment of the IPO, leading them to require a price reduction in order to participate in the offering.
Subject: Going public (Securities) -- United States -- Econometric models
Subject: Industries -- United States -- Econometric models
Terms of Use: http://creativecommons.org/licenses/by-nc/3.0/us/
Permanent URL: http://hdl.handle.net/10066/8818

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Henrick, Bryan C.. "The Role of Industry Affiliation in the Underpricing of U.S. IPOs". 2012. Available electronically from http://hdl.handle.net/10066/8818.

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