Motives for Going Public and Underpricing: New Evidence from Korea
Journal of Human Resource Costing & Accounting 09/2008, Vol. 12, No. (3):179-212
University of Alberta School of Business Research Paper No. 2013-1066
Posted: 2 Jul 2013
Date Written: June 1, 1992
Abstract
Purpose – The primary objective of this paper is to examine the association between the seven human-resource features (spanning three major themes: qualifications and credentials; business and initial public offering (IPO) launch experience; and diversity) of independent audit committee members and the level of underpricing.
Design/methodology/approach – A sample of 410 Singapore IPOs listing on the stock exchange of Singapore from January 1, 1997 to December 31, 2006 was used.
Findings – Empirical results overall suggest no overwhelming association between the human-resource features of IPO audit committees and underpricing. Rather, the findings suggest only some specific human-resource features (e.g. presence of an independent audit committee member with accounting qualifications and credentials) are of significance. Others (e.g. gender diversity of independent audit committee members) have little or no association. Also, results do not suggest a major category of human-resource features (i.e. qualifications and credentials, business and IPO launch experience, or diversity) is associated with underpricing. Time also does not appear to affect the results.
Practical implications – As human-resource features tended to increase rather than lower an IPO's cost of capital, or had not influence at all, our findings generally do not support some policymakers' arguments for the introduction of mandated uniform audit committee structures. Rather, the results support flexibility to determine the properties of the audit committee.
Originality/value – This study is one of the first (particularly outside the USA) to investigate linkages between audit committee human-resource features and underpricing. Whilst acknowledging some caveats associated with this study, such as focusing on a single nation, this paper contributes relevant insights to the debate about audit committee effectiveness.
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