Underpricing versus gross spread: New evidence on the effect of sold shares at the time of IPOs
This paper sheds light on the impact of initial owners' decisions to reduce underpricing at the time of initial public offerings (IPOs). Using a sample of 172 French IPOs, empirical findings indicate that the larger the percentage of primary and secondary shares sold, the higher the gross spread paid by initial owners, which reduces underpricing. Above a certain level of primary shares sold, however, underpricing increases. In contrast with prior research on US IPOs, initial owners endogenously determine the fraction of primary and secondary shares sold. When a firm goes public in the Nouveau Marché, the market for high-growth firms, initial owners are more concerned about the signalling effect of the sale of their secondary shares than the dilutive effect of primary shares. Therefore, they pay a larger gross spread in offerings with a higher participation ratio in order to reduce underpricing.
Year of publication: |
2008
|
---|---|
Authors: | Chahine, Salim |
Published in: |
Journal of Multinational Financial Management. - Elsevier, ISSN 1042-444X. - Vol. 18.2008, 2, p. 180-196
|
Publisher: |
Elsevier |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Impact of social media strategies on stock price : the case of Twitter
Chahine, Salim, (2018)
-
Al‐Okaily, Jihad, (2020)
-
Chahine, Salim, (2020)
- More ...