We examine investment banks' strategic entry and market share gain in the new China H-share IPO (HIPO) market since 1993. Investment banks would have the incentive in initial years to obtain the HIPO business by low balling, i.e., providing high offer prices to the issuer, leading to a lower...

On May 18, 2012 Facebook held its initial public offering (IPO), raising over $16 billion making it one of the largest IPOs in history. To the surprise of many investors, there was no underpricing ― the stock closed the first day of trading flat from its offer price. The Facebook IPO was...

Practitioners, regulators, and the financial media argue that underwriters tie Initial Public Offering (IPO) allocations to investor post-listing buying of the issuer shares in a process labelled price support. Arguably, this excess demand boosts post-listing returns which underwriters trade...

Clustering of IPO underwriting spreads at 7% poses two important puzzles: Is the market for U.S. equity underwriting services anti-competitive and why do equity underwriters invest in reputation-building? This study resolves both puzzles. Modeling endogeneity of firm-underwriter choice using a...

We explain why initial underpricing of new issue exists globally and is not arbitraged away in an efficient market. We argue that initial underpricing is a natural by-product of liquidity-motivated ownership dispersion requirements and divergence of opinion. In our framework, as shares are...

This paper investigates the role of information precision in IPO pricing. The model shows that more precise information will exert more influence on the offer price. In strong support of the model, I find that the proportion of the industry return during the waiting period that is incorporated...

We examine the relation between litigation risk and IPO underpricing and test two aspects of the litigation-risk hypothesis: (1) firms with higher litigation risk underprice their IPOs by a greater amount as a form of insurance (insurance effect) and (2) higher underpricing lowers expected...

Most studies of IPO activity focus on individual issuer decision (filings, issuances, withdrawals). This study provides a more complete empirical picture of the IPO market by tracking the monthly value of IPOs in registration from 1998 to 2007. The value in registration has a significantly...

We examine the impact of investor sentiment on the IPO pricing process. We propose that investor sentiment has a systematic component, which is due to market-wide sentiment, and an idiosyncratic (residual) component. We find some evidence that systematic sentiment impacts IPO valuations, but...