Venture capital affiliation with underwriters and the underpricing of initial public offerings in Japan

Yasuhiro Arikawa, Gael Imad'eddine

研究成果: Article

11 引用 (Scopus)

抄録

This paper presents evidence using Japanese data that shows that the principal-agent problem between underwriter and issuing firms is the cause of the underpricing of initial public offerings. We find that the initial return is lower when the venture capital is a subsidiary of the lead underwriter and directly invested into the issuing firm rather than via a limited partnership fund. We also find that the initial return is larger when one of the top three security firms is the underwriter. This means that underpricing is more serious when the bargaining power of the underwriter is large. Together, these findings support the hypothesis that an equity investment in issuing firms by the underwriter improves the alignment between the underwriter and the issuing firm, and thus helps to increase the offer price. The principal-agent problem between the underwriter and issuers is one of the reasons for the underpricing.

元の言語English
ページ(範囲)502-516
ページ数15
ジャーナルJournal of Economics and Business
62
発行部数6
DOI
出版物ステータスPublished - 2010 11

Fingerprint

Underpricing
Initial public offerings
Japan
Underwriters
Venture capital
Principal-agent problem
Bargaining power
Equity
Subsidiaries
Alignment

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

これを引用

@article{bd3b5c2c13a64d408b235f1452d3efef,
title = "Venture capital affiliation with underwriters and the underpricing of initial public offerings in Japan",
abstract = "This paper presents evidence using Japanese data that shows that the principal-agent problem between underwriter and issuing firms is the cause of the underpricing of initial public offerings. We find that the initial return is lower when the venture capital is a subsidiary of the lead underwriter and directly invested into the issuing firm rather than via a limited partnership fund. We also find that the initial return is larger when one of the top three security firms is the underwriter. This means that underpricing is more serious when the bargaining power of the underwriter is large. Together, these findings support the hypothesis that an equity investment in issuing firms by the underwriter improves the alignment between the underwriter and the issuing firm, and thus helps to increase the offer price. The principal-agent problem between the underwriter and issuers is one of the reasons for the underpricing.",
keywords = "IPO in Japan, Principal-agent problem, Underpricing",
author = "Yasuhiro Arikawa and Gael Imad'eddine",
year = "2010",
month = "11",
doi = "10.1016/j.jeconbus.2010.04.003",
language = "English",
volume = "62",
pages = "502--516",
journal = "Journal of Economics and Business",
issn = "0148-6195",
publisher = "Elsevier Inc.",
number = "6",

}

TY - JOUR

T1 - Venture capital affiliation with underwriters and the underpricing of initial public offerings in Japan

AU - Arikawa, Yasuhiro

AU - Imad'eddine, Gael

PY - 2010/11

Y1 - 2010/11

N2 - This paper presents evidence using Japanese data that shows that the principal-agent problem between underwriter and issuing firms is the cause of the underpricing of initial public offerings. We find that the initial return is lower when the venture capital is a subsidiary of the lead underwriter and directly invested into the issuing firm rather than via a limited partnership fund. We also find that the initial return is larger when one of the top three security firms is the underwriter. This means that underpricing is more serious when the bargaining power of the underwriter is large. Together, these findings support the hypothesis that an equity investment in issuing firms by the underwriter improves the alignment between the underwriter and the issuing firm, and thus helps to increase the offer price. The principal-agent problem between the underwriter and issuers is one of the reasons for the underpricing.

AB - This paper presents evidence using Japanese data that shows that the principal-agent problem between underwriter and issuing firms is the cause of the underpricing of initial public offerings. We find that the initial return is lower when the venture capital is a subsidiary of the lead underwriter and directly invested into the issuing firm rather than via a limited partnership fund. We also find that the initial return is larger when one of the top three security firms is the underwriter. This means that underpricing is more serious when the bargaining power of the underwriter is large. Together, these findings support the hypothesis that an equity investment in issuing firms by the underwriter improves the alignment between the underwriter and the issuing firm, and thus helps to increase the offer price. The principal-agent problem between the underwriter and issuers is one of the reasons for the underpricing.

KW - IPO in Japan

KW - Principal-agent problem

KW - Underpricing

UR - http://www.scopus.com/inward/record.url?scp=78649447742&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=78649447742&partnerID=8YFLogxK

U2 - 10.1016/j.jeconbus.2010.04.003

DO - 10.1016/j.jeconbus.2010.04.003

M3 - Article

VL - 62

SP - 502

EP - 516

JO - Journal of Economics and Business

JF - Journal of Economics and Business

SN - 0148-6195

IS - 6

ER -