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...

Investigates how investment bankers use indications of interest from client investors to price and allocate new issues. Investors who buy initial public offerings (IPOs) can achieve sizable early returns. Recent research rationalizes this apparent contradiction to market efficiency as a response...