Underpricing of bank IPO's in intermediary-oriented marketplaces: a test of Baron's model on the Italian market

Baron’s model demonstrates that underpricing results from asymmetrical information between issuers and underwriters. Muscarella and Vetsuypens' test on the validity of Baron’s theory in the US market showed no significant results. However, the model may partially explain underpricing in countries strongly oriented towards financial intermediaries, and is here tested empirically on the Italian market. We find that underpricing of self-underwritten bank IPOs is lower with respect to other firms and that information asymmetry between the issuer and intermediary may be a reason for underpricing