Determinants of IPO Underpricing: An Empirical Investigation

Lacking information regarding the phenomenon of underpricing on Initial Public Offering (IPO) in Italy, this thesis aims at examining five IPO underpricing determinants that are constructed based on past literature. These determinants are tested through a set of explanatory variables which are employed in an Ordinary Least Squares regression model to check if they are statistically related to IPO underpricing. Multiple bookbuilder, EBITDA to total assets and Ln expected ipo proceeds show statistical significance and this result is consistent with the expectations. Whereas Ln price to sales and Industry risk have not proven any significant relationship with underpricing. Additionally, this paper covers a sound review of fifteen IPO underpricing theories grouped in information asymmetry, institutional theories, ownership and control theories, and behavioral theories. Among all these theories, the signaling theory and the ex-ante uncertainty of firm’s specific factors theory result as the most explicative of the underpricing phenomenon in Borsa Italiana stock exchange.