Determinants of the Underpricing of New Shares During the Subscription Period : Empirical Evidence from the Spanish Stock Exchange

This paper reports on an issue hitherto unexplored in the literature, namely, the new shares price setting during the subscription period. We report evidence of a spread between the old stock price and the value of new shares obtained through subscription. A framework is developed within which to analyse the explanatory factors involved in this spread in the Spanish Stock Exchange. The empirical evidence suggests that new share prices during the subscription period are influenced by a range of factors, such as difference in the amount of tax to which subscription rights and capital gains are subject, characteristics of the issuer and the issue, norms established between clients and banks, and the microstructure of the subscription rights market