search query: @author Franks, J. / total: 11
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| Author: | Brennan, M. J. Franks, J. |
| Title: | Underpricing, ownership and control in initial public offerings of equity securities in the UK |
| Journal: | Journal of Financial Economics
1997 : SEP, Vol. 45:3, p. 391-413 |
| Index terms: | STOCK MARKETS UNITED KINGDOM PRICING |
| Language: | eng |
| Abstract: | In this paper we examine how separation of ownership and control evolves as a result of an Initial Public Offering (IPO) and how the underpricing of the issue can be used by insiders to retain control. Using data from a sample of 69 IPOs in the UK, we show that underpricing is used to ensure oversubscribtion and rationing in the share allocation process so as to allow owners to discriminate between applicants for shares and to reduce the block size of new shareholdings. We find that of the pre-IPO shareholders in a firm, directors sell only a modest fraction of their shares at the time of the offering and in the seven subsequent years. In contrast, holdings of non-directors are virtually eliminated during the same period. As a result, in less than seven years, almost two-thirds of the offering company's shares have been sold to outside shareholders. |
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