Greedy CEOs and IPO underpricing: Evidence from China

This study explores whether greedy CEOs impact initial public offering (IPO) underpricing. Using a sample of IPOs in China, we find that CEO greed is positively associated with underpricing. Our inference remains stable after overcoming the endogeneity problem. The greed impact also relies on equity-based managerial compensation. As channel analyses indicate, underpricing boosts share subscription and diffuses ownership concentration, thereby enabling greedy managers to undermine corporate governance and conduct more opportunistic activities. Altogether, these findings suggest that greedy CEOs harness underpricing to pursue their private benefits of control by mitigating monitoring from blockholders.