Work

Litigation Risk and IPO Underpricing

Year: 2001

Type: article

Abstract: We examine the relation between litigation risk and IPO underpricing. To adjust for the endogeneity bias in previous studies, we use a simultaneous equation framework. Evidence suggests that firms employ underpricing as a form of insurance against future litigation costs. Specifically, firms with greater litigation risk underprice their IPOs by a greater amount. Further, consistent with underpricing representing a viable form of insurance, results indicate that higher underpricing significantly lowers litigation risk

Author: Michelle Lowry

Institution: Drexel University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: green

OpenAlex ID: W3121553374

FWCI: 6.099

Cites: 12

Cited by: 42

Related to: 10