IDEAS home Printed from https://ideas.repec.org/p/hhs/stavef/2017_010.html
   My bibliography  Save this paper

IPO Underpricing: What about the Shipping Sector?

Author

Listed:
  • Klova, Valeriia

    (University of Stavanger)

Abstract

This paper looks at IPO underpricing in the shipping sector. This sector is of interest as it has unique characteristics, among them pro-cyclicality, long history, and ownership concentration. Moreover, the average level of underpricing in shipping is reported to be substantially lower than the overall level. The effects of shipping-specific factors on underpricing are exhaustively studied in this paper for the first time. In connection with shipping characteristics, we hypothesize sev- eral underpricing theories to be relevant explanations of underpricing in the shipping sector. More specifically, we investigate an investor sentiment theory as shipping is highly exposed to business cycles; an information asymmetry argument as there seems to be low information asymmetry in shipping; and two ownership and control theories, namely, the Brennan and Franks managerial control theory and the Stoughton and Zechner agency cost theory, due to the highly-concentrated ownership prevalent in the shipping sector. In addition, we consider a partial adjustment theory that has gained substantial empirical support in the literature. In order to test the aforementioned theories and shipping-specific factors, we perform a cross-sectional regression analysis using a sam- ple of 60 shipping IPOs from four different stock exchanges. The partial adjustment theory and the Stoughton and Zechner agency cost theory are supported by the results, while the investor sen- timent theory, information asymmetry argument, and the Brennan and Franks managerial control theory are rejected. Importantly, the Stoughton and Zechner theory and downward price revisions prevalent among shipping firms can partially explain the low underpricing puzzle in shipping. The robustness of the obtained empirical results is verified using a control sample of non-shipping IPOs.

Suggested Citation

  • Klova, Valeriia, 2017. "IPO Underpricing: What about the Shipping Sector?," UiS Working Papers in Economics and Finance 2017/10, University of Stavanger.
    • Handle: RePEc:hhs:stavef:2017_010
    as

    Download full text from publisher

    File URL: http://www1.uis.no/ansatt/odegaard/uis_wps_econ_fin/uis_wps_2017_10_klova.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Initial Public Offering; IPO underpricing; Shipping sector; Partial adjustment theory; Investor sentiment theory; Stoughton and Zechner theory.;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:hhs:stavef:2017_010. 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: Bernt Arne Odegaard (email available below). General contact details of provider: https://edirc.repec.org/data/iouisno.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.