Nepotism in IPOs: Consequences for Issuers and Investors
Additional information
Authors
Degeorge F.,
Pratobevera G.
Type
Journal Article
Year
2025
Language
English
Abstract
IPO underwriters have an incentive to underprice an IPO when they allocate shares to their affiliated funds. We label this conflict of interest “supernepotism” and we analyze its effect on IPO pricing. Using a regression discontinuity design (RDD) on a novel hand-collected data set, we find that higher allocations to underwriter-affiliated funds cause higher IPO underpricing. Our evidence suggests that supernepotism has monetary costs for issuers.
Keywords
Underpricing, IPOs, Affiliated funds, Conflicts of interest, RDD
Journal
Journal of Financial and Quantitative Analysis
Volume
60
Number ( Month )
5 ( August )
Pages (or article number)
2367-2397
