Effect of Director Interlocks, Composition of Board and Family Involvement on IPO Underpricing: An Empirical Study of IPOs in India

The subject of family firm initial public offering (IPOs) remains an under-researched area, with most research papers focusing on developed nations. This study provides empirical evidence on the relationship between IPO underpricing, director interlocks, composition of board and family involvement in family and non-family firm IPOs in India. By linking IPO underpricing to relatively understudied aspects of corporate governance in India’s developing economy, the current empirical study contributes to the body of literature on IPOs. This study examines 266 mainboard IPOs listed on the BSE between 2010 and 2021, which includes 196 family business IPOs and 70 non-family business IPOs. The likelihood of IPO underpricing is predicted using a logistic regression model. Our result indicates that insider interlocks and the presence of independent directors significantly reduce IPO underpricing in non-family firms, while the involvement of family has a significant negative effect on underpricing in family firms. Additionally, the presence of women directors significantly reduces IPO underpricing in both types of firms. Our findings suggest that family firm IPOs experience lower levels of underpricing compared to non-family firm IPOs.