Authors: Ahmed Jeribi; Anis Jarboui
Addresses: Faculty of Economic Sciences and Management of Sfax-Tunisia, LARTIGE Laboratory, Sfax University, BP 1013, Tunisia ' Faculty of Economic Sciences and Management of Sfax-Tunisia, LARTIGE Laboratory, Sfax University, BP 1013, Tunisia
Abstract: This paper investigates how IPO firms and underwriters determine the offer price discount and allocate new issues. Using a sample of 33 IPOs listed on Tunisian Stock Exchange from 1994 to 2012, we find that small investors are preferred for Tunisian IPO firms. Insiders use high-reputed underwriters who exploit their superior market knowledge to more deliberately discount the fair value estimate. The desire of underwriters to promote institutional investors is one of the most important reasons for the deliberate price discount. The discount is not a compensation for uninformed investors who are confronted with the winner's curse problem. It is a cost to the issuer in order to induce institutional investors to reveal their private information. Insiders are concerned only with the price discount insofar as they stand to lose from it. However, outsiders suffer most from this loss.
Keywords: initial public offerings; IPO price discount; insiders; underwriters; desired ownership structure; asymmetric information; Tunisia; stock markets; market knowledge; fair value estimate; institutional investors; private information.
International Journal of Business and Emerging Markets, 2014 Vol.6 No.2, pp.121 - 138
Available online: 17 Apr 2014 *Full-text access for editors Access for subscribers Purchase this article Comment on this article