Professor Andreas Charitou, University of Cyprus   

"Is the whole more than the sum of its parts? Underpricing and long-run IPO performance"
Wednesday, 7 May 2025. 15:00-16:30
Room 282, The Hothouse, Adam Smith Business School 

Abstract

We use the IPO initial filing range and the degree to which the overallotment option is exercised to estimate the intrinsic price and use this price to decompose IPO underpricing into a market-inefficiency component and an underwriter-bias component. We show that although an investment strategy that goes long on undervalued and short on overvalued IPOs based on underpricing does not result in significant returns, a similar strategy based on Market Inefficiency (Underwriter Bias) earns three-year returns of 15.69% (30.05%). Multivariate analyses corroborate this evidence by indicating that Underwriter Bias is positively related to future returns. We conclude that IPO future returns can be predicted by the deviation of the intrinsic price from the offer price.

Keywords: Initial public offering (IPO), overallotment option, underpricing, market inefficiency, underwriter bias, long-run return performance.

Bio

Andreas Charitou is a Professor of Accounting and Finance at the University of Cyprus. He served as an Associate Professor (with tenure) at the University of Toronto for eleven years and as a lecturer/instructor at Pennsylvania State University for three years. He has held significant leadership roles, including eleven years as Dean and Deputy Dean of the School of Economics and Management at the University of Cyprus, five years as Chairman of the Department of Business Administration, and co-chair of the MBA and PhD programs in Finance. He is currently the Chair of the MBA Board at the University of Cyprus.

Professor Charitou earned his MSc and Ph.D. on scholarship from Pennsylvania State University. He is a Certified Management Accountant (C.M.A., U.S.A) and was affiliated with the American Institute of Certified Public Accountants, holding their Professional Ethics for CPAs Certificate. His teaching excellence has been recognized with awards at both the MBA and undergraduate levels from the University of Toronto, and he holds a Higher Education Teaching Certificate from Harvard University.

His academic contributions extend internationally through visiting professorships at institutions such as Northwestern University, Kellogg School of Management (USA), University of Illinois at Urbana-Champaign (USA), University of Toronto (Canada), University of Sydney (Australia), King’s College London, UK.

Currently, Professor Charitou serves on the Board of Directors of the Central Bank of Cyprus, where he chairs the Audit Committee. He has also been a member of the Disciplinary Committee of the Institute of Certified Public Accountants of Cyprus for more than a decade. His past governance experience includes roles such as Member of the Board of Directors of the Hellenic Bank (including Audit Committee Chair and Member of the Risk Committee), Cooperative Central Bank (Risk Committee Chair), Cyprus Securities and Exchange Commission, Cyprus Stock Exchange, Fiscal Council of Cyprus, KYSATS (Vice Chair). Additionally, he was appointed by the Council of Ministers as an Expert of the Commission of Inquiry on the Cyprus Economy.

Professor Charitou is the Editor in Chief for the International Journal of Accounting (USA) and is Associate Editor of the Abacus Journal, both international academic journals. He is a member of the European Accounting Association, and the Institute of Management Accountants (USA). His research interests include risk management, credit analysis and bankruptcy prediction, corporate governance, executive compensation, international capital markets, and international cross-listing. He has published in leading international journals such as the Journal of Financial and Quantitative Analysis (JFQA), Review of Accounting Studies (RAST), Journal of Corporate Finance, Journal of Banking and Finance, Journal of Accounting, Auditing and Finance, Abacus, Journal of Business Finance and Accounting, Journal of Accounting and Public Policy, European Accounting Review, International Journal of Accounting, and Accounting and Business Research

For further information, please contact business-seminar-series@glasgow.ac.uk.

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First published: 28 April 2025

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