IDEAS home Printed from https://ideas.repec.org/p/fth/pennfi/15-81.html
   My bibliography  Save this paper

Insider Holdings and the Pricing of Initial Public Offerings

Author

Listed:
  • Jay Ritter

Abstract

For a large sample of initial public offerings of common stock, insider holdings are positively related to market value/book value ratios. Three hypotheses are presented to explain this relation: (i) insider holdings signal relative firm value, (ii) an agency relation is present, so that firms with higher insider holdings have harder-working managers, and are thus worth more, and (iii) small firms with high values have wealthier managers, and these managers do not fully diversify their portfolios, so that the aforementioned statistical finding is merely a "wealth effect." A number of tests are performed on the implications of these hypotheses, with no single hypothesis by itself being fully consistent with the data. Insider holdings do appear to be a signal of firm value, but the wealth effect magnifies the relation. No evidence is found supporting the agency hypothesis.

Suggested Citation

  • Jay Ritter, "undated". "Insider Holdings and the Pricing of Initial Public Offerings," Rodney L. White Center for Financial Research Working Papers 15-81, Wharton School Rodney L. White Center for Financial Research.
    • Handle: RePEc:fth:pennfi:15-81
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fth:pennfi:15-81. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Krichel (email available below). General contact details of provider: https://edirc.repec.org/data/rwupaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.