Litigation Risk and IPO Underpricing

Abstract

We examine the relation between litigation risk and IPO underpricing. To adjust for the endogeneity bias in previous studies, we use a simultaneous equation framework. Evidence suggests that firms employ underpricing as a form of insurance against future litigation costs. Specifically, firms with greater litigation risk underprice their IPOs by a greater amount. Further, consistent with underpricing representing a viable form of insurance, results indicate that higher underpricing significantly lowers litigation risk

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 42 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.