Board composition, share ownership, and 'underpricing'of U.K. IPO firms

(Using a sample of 251 IPOs in the United Kingdom, this paper examines interlinks between executive and nonexecutive characteristics, share ownership, and short-term performance measured in terms of share oXer 'underpricing. ' It argues that executives' power and previous experience directly aXect ex ante choice of nonexecutive directors and their ownership interests in thefirm. These endogenously developed governance factors may be used by IPO teams strategically to reduce the extent of underpricing. However, there is a selective response of investors to diffierent board characteristics and share ownership structure. Copyright (C) 2002 John Wiley & Sons, Ltd.

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