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Erscheinungsjahr: 
1999
Schriftenreihe/Nr.: 
Queen's Economics Department Working Paper No. 990
Verlag: 
Queen's University, Department of Economics, Kingston (Ontario)
Zusammenfassung: 
We explain why underpricing in IPOs can be large in magnitude and clustered, using a signalling model where firms have private information about their qualities (high or low). A novel feature is that a firm, if perceived by the market as high quality, benefits from the industry's publicity which is an increasing function of the amount of IPO underpricing by all high-quality firms in the industry. Despite the potential free-rider problem created by the industry's publicity, we show that a high-quality firm chooses to underprice its own IPO as the best response to other high-quality firms' underpricing. Thus, IPO underpricing is clustered.
Schlagwörter: 
Initial public offering
Signalling
Externality
Multiple equilibria
JEL: 
G30
D82
Dokumentart: 
Working Paper

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