Underpricing of IPOs of U.S. Family Controlled Businesses

This paper evaluates the initial public offering to determine if there is any significant difference in the underpricing between Family Controlled Businesses (FCBs) and Non-Family Controlled Businesses (NFCBs), which in turn can shed light into the control and operational differences between the two groups. This study evaluates first day underpricing of IPOs in FCB versus NFCB during the 1996-2004 period and finds that FCBs experienced less underpricing on the first day of trading versus NFCBs. The FCBs paid higher underwriting fees for a less prestigious Investment Banker but experienced less underpricing.