Department of Accounting and Finance ΛΟΧ 590

Postgraduate Thesis

Thesis supervisor: Dr Irene Karamanou

Hadjigavriel Stavriana

Acknowledgments:
I would like to thank my supervisor, Dr Irene Karamanou, for guiding and helping me throughout my thesis as her critical thinking and logical guidance was of significant importance to me. I would also like to thank my family for supporting me and motivating me not only throughout my postgraduate but also undergraduate degree.

Contents:

1. Introduction 1 2.1 Background to the IPOs……….………...............................................................1 2.2 Problem Discussion………….……...…………………….………………….....4 2.3 Contribution of the study……………………………………….……...………..5 2. Literature Review 6
2.1 Lockup Agreements…………………………………………………………….6
2.2 The Stabilization process-price support………………………………………...7
2.3 A theoretical background to underpricing………………………...……………8
2.4 The adverse selection……………………………………………………...…....8
2.5 How can underwriters affect underpricing………………….……………..……9
2.6 The role of institutional investors……………………………………….……..11
2.7 Issuers’ holdings……………………………………………….………………11
2.8 Underwriters’ purchases…………………………………………………….…12
3. Development of Hypotheses 13 3.1 Information asymmetry & Underwriters’ holdings impact on IPO price………13 3.2 The issue of realizing profits……………………………………………………15
4. Methodology 16 4.1 Dataset and Measurement of Variables…………………………………………16 4.2 Empirical Models……………………………………………………………….17

5. Empirical Results 19 5.1 Trading in the Short Term………………………………………………………19
5.2 The information advantage issue………………………………………………..19
6. Conclusion 20 Reference 21-22 Appendix 23-38

Introduction:

1.1 IPOs background