Abstract
We examine how Japanese corporate governance characteristics affect IPO underpricing. The results show that parent ownership does not affect underpricing in IPO firms. We also find that greater CEO ownership is expected to cause principal–principal conflicts and to exacerbate underpricing in IPO firms. Our empirical results also reveal that bank ties mitigate underpricing and function as effective monitoring mechanisms. Furthermore, the positive correlation between CEO ownership and IPO firm underpricing is moderated by the parent–subsidiary relationship. Finally, independent venture capital firms do not mitigate underpricing of IPO firms with parent–subsidiary relationships.
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