Issue Size Choice and “Underpricing” in Thrift Mutual‐to‐Stock Conversions

Issue Size Choice and “Underpricing” in Thrift Mutual‐to‐Stock Conversions ABSTRACT Issue size choice and underpricing in mutual‐to‐stock conversions of thrifts are explained as a function of growth opportunities, perquisite consumption, and proprietary information. We provide evidence that thrifts with greater growth opportunities choose larger issue size and experience higher after‐market price appreciation. This finding persists when we allow for investors' inferences about managers' proprietary information. Variables that explain underpricing in typical initial public offerings are significant by themselves but lose significance when combined with the issue size choice variables. Managerial holdings and the offer price do not act as dissipative signals of value in thrift conversions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Issue Size Choice and “Underpricing” in Thrift Mutual‐to‐Stock Conversions

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Abstract

ABSTRACT Issue size choice and underpricing in mutual‐to‐stock conversions of thrifts are explained as a function of growth opportunities, perquisite consumption, and proprietary information. We provide evidence that thrifts with greater growth opportunities choose larger issue size and experience higher after‐market price appreciation. This finding persists when we allow for investors' inferences about managers' proprietary information. Variables that explain underpricing in typical initial public offerings are significant by themselves but lose significance when combined with the issue size choice variables. Managerial holdings and the offer price do not act as dissipative signals of value in thrift conversions.

Journal

The Journal of FinanceWiley

Published: Dec 1, 1993

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