We examine whether underwriters price-up weakly-demanded IPOs to prevent withdrawal. Our empirical strategy exploits a discontinuity in the distribution of IPO prices around the low boundary of the filing range. Offerings with a high ex-ante withdrawal probability that are priced at this...

We investigate the effect of the “7% solution”—the fact that underwriters in the U.S. charge a 7% spread to most IPOs between $20 million and $100 million in size—on the ensuing pricing of the offerings. Our identification exploits the variation in spreads that is due to distinct kinks...