Market-to-book ratios, equity retention, and management ownership in Finnish initial public offerings

Article Abstract:

A significant positive relationship exists between the fraction of equity retained by original stockholders and the market-to-book ratio in a sample of Finnish initial public offerings. This supports Leland and Pyle's hypothesis that the willingness of original shareholders to retain equity is an indicator of the quality of their firm. Management ownership's association with relative firm value was also found to be significantly positive at low ownership levels, but insignificant at high ownership levels. This affirms somewhat the agency hypothesis, which indicates that corporate value is a function of managerial equity ownership.

Research, Finland, Stockholders, Beliefs, opinions and attitudes

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Growth fixation and the performance of bank initial public offerings, 1983 - 1991

Article Abstract:

The capital market may have fixated on the impressive growth of numerous banks and thrifts that went public or it may not have sufficiently accounted for changes in the post-initial public offering (IPO) risk of these banks' loan portfolios. This was gleaned from a survey of 393 bank IPOs reported from 1983 to 1991 that posted three benchmarks of returns over a post-offering holding period of five years. Such a decline in performance may have been accounted for by loan growths that were too aggressive or by the rapid increases in loan losses that these banks experienced after the IPO.

Banking Institutions, Depository Credit Intermediation, DEPOSITORY INSTITUTIONS, Banking industry, Evaluation, Banks (Finance), Loan loss reserves

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Who benefits from secondary market price stabilization of IPOs?

Article Abstract:

Price stabilization efforts undertaken by US underwriters provide significant financial leverage to large-quantity investors, particularly institutional traders. This may be explained by the attenuated selling nature of initial public offers whose secondary market price support is provided by underwriters. For large-scale IPOs, preferably those which offer about 20,000 shares, stabilized issues were found to generate more selling orders compared to non-stabilized issues.

Pricing Policy, Methods, Pricing, Financial management, Price control, Price regulations

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