IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Capacity Constraints and IPO Underpricing in the Property and Liability Insurance Industry

  • Tong Yu
  • Bingxuan Lin
  • Mulong Wang
  • William R. Feldhaus
Registered author(s):

    We analyze the impact of capacity constraints on IPO underpricing in the US property and liability (P&L) insurance industry. Our results show that insurer IPOs experience much less underpricing when insurers go public during capacity-constrained periods. Monte Carlo simulation shows that IPOs in other industries do not exhibit similar traits, suggesting our findings are specific to the P&L insurance industry. In addition, our regression analyses confirm that IPO underpricing is negatively associated with P&L insurance industry capacity measures. Going public provides P&L insurers with better access to the capital market, thus alleviating the constraint on their capacity to provide insurance coverage. However, going public after capital shocks may not be ideal for firms whose performance is adversely affected by shocks due to higher IPO costs and stricter disclosure requirements. IPOs during capacity-constrained periods are less underpriced since capacity constraints assist in screening out poor performers.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.insuranceissues.org/PDFs/272YLWF.pdf
    Download Restriction: no

    Article provided by Western Risk and Insurance Association in its journal Journal of Insurance Issues.

    Volume (Year): 27 (2004)
    Issue (Month): 2 ()
    Pages: 104-122

    as
    in new window

    Handle: RePEc:wri:journl:v:27:y:2004:i:2:p:104-122
    Contact details of provider:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wri:journl:v:27:y:2004:i:2:p:104-122. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (James Barrese)

    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.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.