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Indiana University Bloomington

Department of Finance

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Research and Publications

Journal Articles

Acquisition Activity and IPO Underpricing

2010, Financial Management

Thomas Boulton, Scott B. Smart, Chad J. Zutter


We propose an “M&A activity” hypothesis as a partial explanation for IPO underpricing. When going public during active corporate control markets, managers may take actions to safeguard their control. In support of this conjecture, we find that pre-IPO M&A activity directly explains IPO underpricing. We also find that underpricing and ownership dispersion are positively correlated, as are ownership dispersion and the probability of remaining independent. Considering the possibility that some managers take their firms public to be acquired, we find that the positive link between M&A activity and underpricing is not robust for firms that are viewed as likely targets.


Boulton, Thomas, Scott B. Smart, and Chad J. Zutter (2010), "Acquisition Activity and IPO Underpricing," Financial Management, Vol. 39, No. 4, Winter, pp. 1521-1546.