Browsing by Author "Siitonen, Jori"

Now showing 1 - 2 of 2

Does ownership concentration play role in IPO underpricing? Evidence from the Finnish IPO market
(2018) Siitonen, Jori
School of Business | Bachelor's thesis
Using a sample of 74 Finnish initial public offerings (IPO) from 1997 to 2017 I examined the impact of the post-IPO ownership concentration on initial public offering underpricing. I found insignificantly that there is no relation between ownership concentration and initial returns. Furthermore, I found significantly that stocks with high-level ownership concentration underperform during the first year after IPO refuting the theory of high ownership concentration and high underpricing. I investigated the association by portfolio construction but also by regressions for individual stocks. My results are robust after controlling different ownership concentration measures and matching firm-adjusting.
Limited attention and dual-class share mispricing
(2021) Siitonen, Jori
School of Business | Master's thesis
The number of dual-class shares is increasing in the stock market, and consequently, some stock exchanges are changing their rules to allow listing multiple share classes with different voting rights. The popularity of dual-class shares raises a question why the prices of two share classes deviate from each other. Previous literature has mainly focused on investigating rational reasons for price discrepancy such as differences in liquidity or voting rights between same company’s share classes. In this thesis I examine whether the price discrepancy is partly mispricing due to investors’ limited cognitive resources and attention towards the price discrepancy of the dual-class shares. I use the daily data of 140 US publicly traded dual-class share pairs during the years 1993-2019. Firstly, I study whether the simple long-short dual-class share trading earns abnormal risk-adjusted returns as a measure of mispricing. Secondly, I form portfolios depending on the pair’s cross-sectional visibility (sales, analyst, and media coverage) to measure the impact of the cross-sectional attention on dual-class share trading. Lastly, by using seven time-varying attention proxies (e.g. Friday or Google Trends, No. pairs opening on the same day), I study with univariate and multivariate regressions how the investor attention on the pair’s divergence day has impact on long-short arbitrage position’s subsequent returns. My findings support the theory of mispricing and limited attention in finance. I find that the price discrepancy of dual-class share is partly mispriced, and the investor’s limited attention increase the extent of the mispricing (as a measure of position’s profitability). According to the FF4-regressions, the long-short dual-class share trading positions are more profitable when trading pairs with low cross-sectional visibility. The arbitrage positions are also more profitable when the prices of share classes diverge from each other on the day of limited investor attention (time-varying attention). The impact of cross-sectional attention is about 1,5% and the impact of time-varying attention about 0,5% on one-month position return. The arbitrage positions associated to the limited attention also converge significantly faster than the positions associated to the high attention, supporting the link between limited attention and temporary mispricing. This thesis has relevant contribution both for academics and practitioners. In addition to update the literature by providing evidence of mispricing with updated data, this is the first paper to explain why investors misprice the relative prices of dual-class shares from the perspective of investors’ behaviour. For practitioners, this thesis may help to define sophisticated arbitrage trading strategies. For all investors, the thesis highlights the importance of considering the price discrepancy of share classes in decision-making when buying or selling dual-class shares.