IPO underpricing and after-market liquidity

• 成果类型: Article
• 署名作者: Ellul, A; Pagano, M
• 署名单位: University of Naples Federico II; Indiana University System; Indiana University Bloomington
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhj018
• 发表日期: 2006
• 页码: 381
• 关键词: initial public offerings; INFORMATION; underwriter; OWNERSHIP; ask; returns; price; cost; RISK

摘要

The underpricing of initial public offerings (IPOs) is generally explained with asymmetric information and risk. We complement these traditional explanations with a new theory where investors worry also about the after-market illiquidity that may result from asymmetric information after the IPO. The less liquid the aftermarket is expected to be, and the less predictable its liquidity, the larger will be the IPO underpricing. Our model blends such liquidity concerns with adverse selection and risk as motives for underpricing. The model's predictions are supported by evidence for 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.