Ipo Underpricing in Eastern Europe: A study of Moral Hazard

Abstract: This paper sets out to investigate whether the size of IPO underpricing can be explained by moral hazard, measured by the level of investor protection. The study has been carried out in Eastern Europe during the post-communist era. In this thesis, I also examine whether the IPO underpricing differs between countries in the region and whether the degree of IPO underpricing has changed over the period. I can find no evidence that IPO underpricing is dependent on the level of investor protection. Furthermore, I find no conclusive evidence that IPO underpricing has differed between the countries in the sample examined. Instead, I find that IPO underpricing has lessened during the period examined, suggesting that factors other than moral hazard would better explain the size of IPO underpricing.