The impact of institutions, ownership structure, business angels, venture capital and lead managers on IPO firm underpricing across North Africa

This paper examines the determinants of IPO underpricing in a unique and comprehensive, sample of 86 IPO firms from across North Africa between 2000 and 2013. The findings suggest that, underpricing is used as a mechanism by which to stimulate excess demand (subscription) for newly, issued stock in order to create a relatively small but highly dispersed, and thus disempowered, minority shareholder base. Domestic venture capital and to lesser extend business angels are, associated with elevated underpricing while the reputational impact from foreign venture capital and, lead managers infers lower underpricing. In terms of institutions and state-level corruption control, policies are most closely linked to substantial reductions in underpricing.