LAUSR

The present research study contributes to the extant literature on underpricing rather uniquely by addressing the under-researched linkage of corporate governance to underpricing. The originality of this effort also lies in being one of the initial efforts of exploring governance in context of initial public offering (IPO) underpricing in Indian settings. The study comprises an empirical analysis of 404 Indian IPOs studied for their board structures and ownership attributes using IPO prospectuses. Drawing support from the signalling theory, the variables board size and board committees exhibit a significant positive relationship to the IPO returns on the listing day. In Indian markets characterized by concentrated family-owned firms, promoter ownership does work as an effective signal for investors who take cues of firm potential from ownership patterns. Corporate governance measures have a miniscule contribution in explaining the underpricing of Indian IPOs and indicating that investors do not incorporate these as a major consideration in their investment decision.