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IPO Underpricing and After-Market Liquidity
| Content Provider | Semantic Scholar |
|---|---|
| Author | Ellul, Andrew Pagano, Marco |
| Copyright Year | 2006 |
| Abstract | The underpricing of the shares sold through Initial Public Offerings (IPOs) is generally explained with asymmetric information and risk. We complement these traditional explanations with a new theory. Investors who buy IPO shares are also concerned by expected liquidity and by the uncertainty about its level when shares start trading on the after-market. The less liquid shares are expected to be, and the less predictable their liquidity is, the larger will be the amount of "money left on the table" by the issuer. We present a model that integrates such liquidity concerns within a traditional framework with adverse selection and risk. The model's predictions are supported by evidence from a sample of 337 British IPOs effected between 1998 and 2000. Using various measures of liquidity, we find that expected after-market liquidity and liquidity risk are important determinants of IPO underpricing, after controlling for variables traditionally used to explain underpricing. |
| Starting Page | 381 |
| Ending Page | 421 |
| Page Count | 41 |
| File Format | PDF HTM / HTML |
| DOI | 10.1093/rfs/hhj018 |
| Volume Number | 19 |
| Alternate Webpage(s) | http://www.dise.unisa.it/WP/wp99.pdf |
| Alternate Webpage(s) | http://www.kelley.iu.edu/Finance/IPO_Liquidty_Paper.pdf |
| Alternate Webpage(s) | http://test.ccfr.org.cn/cicf2004/papers/5-3-3.pdf |
| Alternate Webpage(s) | http://som.yale.edu/jfm/ProgramPDFs/draft_Yale.pdf |
| Alternate Webpage(s) | http://finance.wharton.upenn.edu/~allenf/capri/papers/191ellul.pdf |
| Alternate Webpage(s) | http://www.ipo-underpricing.com/Downloads/Ellul_Market%20Liquidity.pdf |
| Alternate Webpage(s) | http://www.csef.it/WP/wp99.pdf |
| Alternate Webpage(s) | https://doi.org/10.1093/rfs%2Fhhj018 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
