Determinants of the underpricing of new shares during the subscription period: empirical evidence from the Spanish stock exchange

Consuelo Riaño Gil ^[1] ; Francisco Javier Ruiz Cabestre ^[1] ; Rafael Santamaría Aquilué ^[2]
1. [1] Universidad de La Rioja
  
  Universidad de La Rioja
  
  Logroño, España
2. [2] Universidad Pública de Navarra
  
  Universidad Pública de Navarra
  
  Pamplona, España
Localización: Applied financial economics, ISSN 0960-3107, Vol. 17, Nº. 7-9, 2007, págs. 521-540
Idioma: inglés
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Resumen
- This article reports on an issue hitherto unexplored in the literature, namely, the 'new shares' price setting during the subscription period. We report evidence of a spread between the old stock price and the value of new shares obtained through subscription. A framework is developed within which to analyse the explanatory factors involved in this spread in the Spanish Stock Exchange. The empirical evidence suggests that new share prices during the subscription period are influenced by a range of factors, such as difference in the amount of tax to which subscription rights and capital gains are subject, characteristics of the issuer and the issue, norms established between clients and banks and the microstructure of the subscription rights market.