Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
958409 | Journal of Empirical Finance | 2006 | 30 Pages |
Abstract
We assess the relative importance of various theoretical explanations of IPO underpricing by focusing on models that assume that the IPO is the first stage of a multi-stage selling scenario in an asymmetric information framework. In a two-period sell-out strategy, we find that firms are worse off due to IPO underpricing but insiders appear to maximize their wealth. The results indicate that the most compelling explanation for IPO underpricing is the entrepreneurial losses model. We also find strong support for the information momentum model and limited support for the information production, market feedback, and changing objective function models. The signaling explanation has the least support.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Duane B. Kennedy, Ranjini Sivakumar, Kenneth R. Vetzal,