EconStor >
Goethe-Universität Frankfurt am Main >
Center for Financial Studies (CFS), Universität Frankfurt a. M.  >
CFS Working Paper Series, Universität Frankfurt a. M. >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/25388
  
Title:Over-allotment options in IPOs on Germany's Neuer Markt: An empirical investigation PDF Logo
Authors:Franzke, Stefanie A.
Schlag, Christian
Issue Date:2002
Series/Report no.:CFS Working Paper 2002/16
Abstract:Over-allotment arrangements are nowadays part of almost any initial public offering. The underwriting banks borrow stocks from the previous shareholders to issue more than the initially announced number of shares. This is combined with the option to cover this short position at the issue price. We present empirical evidence on the value of these arrangements to the underwriters of initial public offerings on the Neuer Markt. The over-allotment arrangement is regarded as a portfolio of a long call option and a short position in a forward contract on the stock, which is different from other approaches presented in the literature. Given the economically substantial values for these option- like claims we try to identify benefits to previous shareholders or new investors when the company is using this instrument in the process of going public. Although we carefully control for potential endogeneity problems, we find virtually no evidence for a reduction in underpricing for firms using overallotment arrangements. Furthermore, we do not find evidence for more pronounced price stabilization activities or better aftermarket performance for firms granting an over-allotment arrangement to the underwriting banks.
Subjects:Over-Allotment Option
Flotation Costs
Underwriter Fee
Neuer Markt
JEL:G32
G13
Document Type:Working Paper
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

Files in This Item:
File Description SizeFormat
364402946.PDF190.58 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/25388

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.