A Proposal to Restrict Manipulative Strategy in Auction IPO's

Mira Ganor

Berkeley Program in Law and Economics, Working Paper Series from Berkeley Program in Law and Economics

Abstract: Book-building, the prevailing method for IPO's, is widely considered flawed, because it results in stock under-pricing. Auction-IPO, on the other hand, is considered, by conventional wisdon, an alternative method that will eliminate the under-pricing. This paper shows how, contrary to customary belief, auction-IPO's may well result in under-pricing. In auction-IPO's, the under-pricing of the stock price is induced by undetected investors' manipulative strategic behavior. I analyze the requirements for such strategic behavior in a linear model. To reduce investors' incentive to manipulate their bid in the auction, this paper proposes to restrict auction participants from trading in the aftermarket immediately following the IPO.

Date: 2004-07-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.escholarship.org/uc/item/4sg5191h.pdf;origin=repeccitec (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:oplwec:qt4sg5191h

Access Statistics for this paper

More papers in Berkeley Program in Law and Economics, Working Paper Series from Berkeley Program in Law and Economics Contact information at EDIRC.
Bibliographic data for series maintained by eScholarship, California Digital Library ().