Business Commons^™

This study examines the underpricing and aftermarket performance of the emerging industry of biotechnology. Findings indicate that the average first day return for the biotech firms was 1.8 and 1.6 percent. Furthermore, the biotech firms significantly underperformed the NASDAQ (-30.7%) and NYSE (-16.5%) over a two-year period after going public.

This study examines the underpricing and aftermarket performance of the emerging industry of biotechnology. Findings indicate that the average first day return for the biotech firms was 1.8 and 1.6 percent. Furthermore, the biotech firms significantly underperformed the NASDAQ (-30.7%) and NYSE (-16.5%) over a two-year period after going public.

Utilizing the entire population of public biotechnology firms from 1980-1994, three models were tested to determine if a relationship exists between the size and composition of the board of directors with performance. Results indicate significant positive relationships between director expertise and the size of a firm’s initial public offering. Going public during hot markets and larger firms were also related to larger initial public offerings. These findings will benefit practitioners in the formation of boards within the biotechnology industry. Managers of firms within the biotechnology industry who are contemplating a public offering will be able to proactively address the composition …