Laddering in initial public offerings

• 成果类型: Article
• 署名作者: Hao, Grace Qing
• 署名单位: University of Missouri System; University of Missouri Columbia
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2006.05.008
• 发表日期: 2007
• 页码: 102-122
• 关键词: laddering; IPO underpricing; manipulation; momentum

摘要

Laddering is a practice whereby the allocating underwriter requires the ladderer to buy additional shares of the issuer in the aftermarket as a condition for receiving shares at the offer price. This paper identifies factors that create incentives to engage in this type of manipulation and models the effect of laddering on initial public offering (IPO) pricing. I show that laddering has a bigger effect on the market price of IPOs with greater expected underpricing (without laddering) and greater expected momentum in the aftermarket; laddering increases the IPO offer price, the aftermarket price, and the money left on the table but does not necessarily increase the percentage underpricing; laddering contributes to long-run underperformance and creates a negative correlation between short-run and long-run returns; and profit-sharing increases the extent of laddering and the percentage underpricing. (c) 2007 Elsevier B.V. All rights reserved.