Initial Public Offering Ipo And Theories Of Underpricing
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Initial Public Offering (IPO) and theories of underpricing by Henning Padberg Pdf
Essay from the year 2006 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, University of Glasgow (Department of Accounting and Finance), course: Financial Markets, language: English, abstract: Related to the issuance of shares there are different kinds of “puzzles” which motivate to take a closer look at: Short-run ‘underpricing’, hot and cold issue markets, spread clustering and longrun underperformance. Even though these phenomena are frequently discussed in several scientific papers and journals, there is no conclusively completed theory. This work will concentrate on the various approaches developed to explain ‘underpricing’. As an introduction into the topic it will also provide a summary of the process of an Initial Public Offering (IPO).
Initial Public Offerings: Findings and Theories by Seth Anderson,T. Randolph Beard,Jeffery A. Born Pdf
Initial public offerings (IPOs) play a crucial role in allocating resources in market economies. Because of the enormous importance of IPOs, an understanding of how IPOs work is fundamental to an understanding of financial markets generally. Of particular interest is the puzzling existence of high initial returns to equity IPOs in the United States and other free-market economies. Audience: Designed for use by anyone wishing to perform further academic research in the area of IPOs and by those practitioners interested in IPOs as investment vehicles.
Empirical Evidence on IPO-Underpricing by Marius Hamer Pdf
Diploma Thesis from the year 2007 in the subject Business economics - Investment and Finance, grade: 1,3, European Business School - International University Schlo Reichartshausen Oestrich-Winkel, 80 entries in the bibliography, language: English, abstract: This paper aims at establishing a link between the average level of initial return of IPO shares, existing underpricing explanations and the dot-com bubble. In years prior to the boom of the new economy, underpricing was explained by various theories, which have extensively been developed since decades. However, in the years 1998 to 2001 IPOs were overly underpriced, leading to assumptions about behavioural aspects and investor irrationality. Analysing a comprehensive dataset of 371 IPOs on the Frankfurter B rse between 1997 and 2007, this paper aims at providing evidence that the observed lower levels of initial returns in recent years can indeed be aligned with existing theories on the basis of rational behaviour of market participants. Firstly, the IPO process and its major participants will be presented followed by a review of relevant studies on the IPO phenomenon. In the next step, established underpricing theories are recapitulated. A descriptive analysis of the data sample points out the particularities concerning the company and transaction characteristics of the sample firms. In a last step, a regression analysis relates various proxies for information asymmetry to established underpricing theories. It gives reason to believe that the irrationality at the turn of the century has vanished and that underpricing can again be explained by established theories.
The Phenomenon of IPO Underpricing in the European and U.S. Stock Markets by Oliver Reiche Pdf
The Initial Public Offering (IPO) marks one of the most important events of a company. Basically, the aim is to generate maximum proceeds by selling the company’s shares to investors. However, the shares that are sold seem to be underpriced as the price significantly soars on the first trading day. Since the very first detection of this phenomenon in the United States in 1969, several subsequent studies have documented the existence of worldwide IPO underpricing. This study focuses on IPO Underpricing in the European and United States Stock Markets by outlining and discussing the following essential issues: What is underpricing in the context of the IPO? Which motivations are there and how do they impact? Is there IPO underpricing in the markets of Europe and the United States of America?
Going Public by Tim Jenkinson,Alexander Ljungqvist Pdf
Going Public investigates why companies routinely underprice themselves as they try to list themselves on the stock exchange. They subsequently underperform over the long-term and, in Going Public, the authors explore these 2 phenomena in plain English.
Initial Public Offerings: A Synthesis of the Literature and Directions for Future Research by Michelle Lowry,Roni Michaely,Ekaterina Volkova Pdf
The purpose of this monograph on conducting an Initial Public Offering (IPO) is to review the existing evidence and suggest areas where our understanding is less complete of the process and would benefit from further research.
Variables Influencing the Severity of IPO Underpricing: An Empirical Analysis of the German Market by Justyna Dietrich Pdf
Underpricing refers to the phenomenon of abnormal first-day returns from initial public offerings (IPOs). Without doubt, any US investor would agree that one day-returns of 11.4% on average are exceptional and a worthwhile investment. Since then many studies have proven that it is a persistent phenomenon and also occurs on markets all over the world. The most puzzling question for scientists is why companies are leaving this money on the table and do not set an offering price that reflects the market demand at the offering date. The main focus of this paper is whether and how the findings of past research, primarily conducted for the US market, apply to the German IPO market. As a result, both investors and issuers shall receive practical implications for their decision-making within the IPO process. This study comprises a brief description of some important theoretical aspects that shape the price setting of an IPO. It focuses on business valuation as it is the basis for setting the price of an IPO. Furthermore, the most common price setting mechanisms are explained. Past research results and theories with regard to IPO underpricing will be outlined and put into relation to the upcoming analysis. This also includes the long-run performance of IPOs and deals especially with the question of whether IPOs are systematically overvalued by investors and, if so, why. The empirical analysis consists of a deduction of influencing variables and an applying theoretical model. Finally, OLS results will be presented and interpreted, which also includes practical implications for both, issuers and investors.
Asymmetric Information relating to Initial Public Offering Underpricing by Fotini Mastroianni Pdf
Essay from the year 2012 in the subject Economics - Finance, , language: English, abstract: The main reason why companies decide to proceed with IPO is mainly to gain access to new funding. The proceeds from the share issue itself are not necessarily intended for direct expansion. The prospects for growth from acquisitions, the funds available for organizational expansion and refinancing of current borrowings have shown, among other things, to be the main motives that newly listed companies consider as very important. The general initial public offering procedure enhances the image and publicity of enterprises and gets not only an initial certification of the professionals in the financial markets but also a long-term price bidding (price signal) to suppliers, workforce and customers. According to Roell (1996), a robust equity value in the subsequent acquisition (during the trading of securities after their initial bid for public offering) reassures suppliers that they can safely grant trade credit, employees are convinced that they can expect a fairly stable job, and customers think that the products of the company will be supported as a result of their purchase (in the aftermath of their purchase).
Handbook of Corporate Finance by B. Espen Eckbo Pdf
Judging by the sheer number of papers reviewed in this Handbook, the empirical analysis of firms’ financing and investment decisions—empirical corporate finance—has become a dominant field in financial economics. The growing interest in everything “corporate is fueled by a healthy combination of fundamental theoretical developments and recent widespread access to large transactional data bases. A less scientific—but nevertheless important—source of inspiration is a growing awareness of the important social implications of corporate behavior and governance. This Handbook takes stock of the main empirical findings to date across an unprecedented spectrum of corporate finance issues, ranging from econometric methodology, to raising capital and capital structure choice, and to managerial incentives and corporate investment behavior. The surveys are written by leading empirical researchers that remain active in their respective areas of interest. With few exceptions, the writing style makes the chapters accessible to industry practitioners. For doctoral students and seasoned academics, the surveys offer dense roadmaps into the empirical research landscape and provide suggestions for future work. *The Handbooks in Finance series offers a broad group of outstanding volumes in various areas of finance *Each individual volume in the series should present an accurate self-contained survey of a sub-field of finance *The series is international in scope with contributions from field leaders the world over
The Role of the Underwriter in the Initial Public Offering Process by Georgi Georgiev Pdf
Bachelor Thesis from the year 2005 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,7, Martin Luther University, 38 entries in the bibliography, language: English, abstract: The world of finance is complex. There are many aspects, which cannot be fully explained and still confuse the researchers. One of the most discussed topics is that of Initial Public Offerings (IPO) mainly because of the intricate connections between investment bankers (underwriters), issuers and buyers. This paper will try to summarize the whole process of going public and emphasize on the role of the (lead) underwriter in it. The paper discusses mainly the American "way" of going public, but the procedure is generally the same for the European market with some differences that are explained in the text. The advantages, disadvantages and the legal requirements for going public are enlightened, in order of understanding the important role, which the underwriter plays in the whole process. The structure and the legal consequences of the due diligence process are presented. The types of agreement between the underwriter and the issuer are described, with the consequences that originate from them. The ways of determining the price and the advantages and disadvantages of any of them are presented, with respect to the importance of the underwriter's role in them and the liabilities that she has. The problem with the underpricing is discussed more detailed, since this is one of the big challenges in the IPO process. Some theories that explain this phenomenon are briefly discussed, showing the mechanism that is behind the underpricing problem. Some of the unlawful allocation practices are listed, with examples that show that even the top underwriters use prohibited actions to ensure the successful completion of the IPO process. The importance of the pre-opening period for the determination of the right market price and the active participation of the underw
IPO Underpricing in Germany - Empirical Analysis of Influencing Variables by Justyna Dietrich Pdf
Inhaltsangabe:Introduction: Detected on the US market centuries ago, underpricing is the phenomenon of abnormal first-day returns from initial public offerings (IPOs). Without doubt, any US investor would agree, that one day-returns of 11.4% on average are exceptional and a worthwhile investment. Since then many studies have proven that it is a persistent phenomenon and also occurs on markets all over the world. The most puzzling question for scientists is why companies are leaving this money on the table and don t set an offering price that reflects the market demand at the offering date. Within that, researchers have also been trying to determine the factors that influence the severity of underpricing. Many different explanations with regard to the existence of underpricing have been derived thus far, with all claiming to be valid even if not exclusively. But despite this effort, research so far has not been able to create common sense. Some even argue that underpricing may not exist at all since most IPOs underperform severely in the long-run which leads some people to the conclusion that IPOs are in fact overpriced. The main focus of this paper is whether and how the findings of past research, primarily conducted for the US market, apply to the German IPO market. As a result, both investors and issuers shall receive practical implications for their decision-making within the IPO process. So far, profound underpricing research for the German market has been rather scarce. Most of the available literature concentrates either on dates before 1997 when most offering prices have been determined by using the fixed price mechanism whereas the most recent studies focus on the German stock exchange segment Neuer Markt exclusively. In contrast, this paper aims to give a more recent analysis of underpricing on the German market without distinguishing between different market segments. Additionally, a broad over-view and understanding of IPO underpricing, taking the long-run performance of IPOs into account, will be included. As a result, this paper is structured as follows: The second section consists of a description of some of the important theoretical aspects that have influence on the price setting of an IPO. It will concentrate on business valuation as it is the basis for setting the price of an IPO. Furthermore, the most common price setting mechanisms shall be explained. Additionally, the special role of the lead underwriter in the IPO [...]
Author : H. Kent Baker,John R. Nofsinger Publisher : John Wiley & Sons Page : 1184 pages File Size : 55,8 Mb Release : 2010-10-01 Category : Business & Economics ISBN : 9780470769683
Behavioral Finance by H. Kent Baker,John R. Nofsinger Pdf
A definitive guide to the growing field of behavioral finance This reliable resource provides a comprehensive view of behavioral finance and its psychological foundations, as well as its applications to finance. Comprising contributed chapters written by distinguished authors from some of the most influential firms and universities in the world, Behavioral Finance provides a synthesis of the most essential elements of this discipline, including psychological concepts and behavioral biases, the behavioral aspects of asset pricing, asset allocation, and market prices, as well as investor behavior, corporate managerial behavior, and social influences. Uses a structured approach to put behavioral finance in perspective Relies on recent research findings to provide guidance through the maze of theories and concepts Discusses the impact of sub-optimal financial decisions on the efficiency of capital markets, personal wealth, and the performance of corporations Behavioral finance has quickly become part of mainstream finance. If you need to gain a better understanding of this topic, look no further than this book.
IPOs and SEOs in the US Real Estate Industry by Philip Radner Pdf
Philip Radner analyzes equity financing phenomena and researches IPO underpricing and SEO announcement effects using data sets for US REITs. Moreover, he discusses underpricing theories and their applicability in the REIT context and gives a theoretical background on IPOs and on underpricing in particular. With this background at hand, the results out of this dissertation imply to focus on the wording in IPO documents as it can help to maximize IPO proceeds. In addition, he analyzes how to better time and announce subsequent equity financing events. It is expected that significantly underpriced issues attract more investors and that subsequent SEOs are then easier to conduct and typically raise more capital.
Initial Public Offerings (IPO) by Greg N. Gregoriou Pdf
After the cooling off of IPOs since the dot com bubble, Google has rekindled the fire for IPOs. This IPO reader contains new articles exclusive to this reader by leading academics from around the world dealing with quantitative and qualitative analyses of this increasingly popular and important area of finance. Articles address new methods of IPO performance, international IPOs, IPO evaluation, IPO underwriting, evaluation and bookbuilding. Although numerous articles are technical in nature, with econometric and statistical models, particular attention has been directed towards the understanding and the applicability of the results as well as theoretical development in this area. This reader will assist researchers, academics, and graduate students to further understand the latest research on IPOs. *Interest in IPOs is increasing again after the Google IPO, and IPOs are up significantly from last year *Chapters by well known academics provide an international perspective, describing research results from IPO data in countries spanning the globe *Research is based on real results from IPO data collected over the past 5-7 years