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Cornerstone Allocation and IPO Underpricing - Non-Linear Evidence from the Swedish Market

Bodelind, Wictor LU and Sjöberg, Erik LU (2025) BUSN79 20251
Department of Business Administration
Abstract
This study investigates the relationship between cornerstone allocation and IPO underpricing in the Swedish market, as well as the moderating role of valuation uncertainty on this relationship. Employing OLS and 2SLS frameworks on a sample of 429 Swedish IPOs from 2010 to 2024, we find evidence of a causal non-linear relationship between cornerstone allocation and IPO underpricing, taking the form of an inverted U-shape. No evidence is found for valuation uncertainty having a moderating effect on this relationship. In light of these findings, we propose a framework of optimal cornerstone allocation, where different levels act as different signaling mechanisms.
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author
Bodelind, Wictor LU and Sjöberg, Erik LU
supervisor
organization
alternative title
A quantitative study on the impact of cornerstone allocation on first-day returns and the moderating role of valuation uncertainty
course
BUSN79 20251
year
type
H1 - Master's Degree (One Year)
subject
keywords
Cornerstone Allocation, IPO, Offer price, Underpricing, Valuation Uncertainty
language
English
id
9208290
date added to LUP
2025-07-07 09:00:39
date last changed
2025-07-07 09:00:39
@misc{9208290,
  abstract     = {{This study investigates the relationship between cornerstone allocation and IPO underpricing in the Swedish market, as well as the moderating role of valuation uncertainty on this relationship. Employing OLS and 2SLS frameworks on a sample of 429 Swedish IPOs from 2010 to 2024, we find evidence of a causal non-linear relationship between cornerstone allocation and IPO underpricing, taking the form of an inverted U-shape. No evidence is found for valuation uncertainty having a moderating effect on this relationship. In light of these findings, we propose a framework of optimal cornerstone allocation, where different levels act as different signaling mechanisms.}},
  author       = {{Bodelind, Wictor and Sjöberg, Erik}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Cornerstone Allocation and IPO Underpricing - Non-Linear Evidence from the Swedish Market}},
  year         = {{2025}},
}