COME ON IN, THE WATER'S FINE! AN EXPERIMENTAL EXAMINATION OF HYBRID IPO AUCTIONS WITH A PUBLIC POOL

Charles R. Schnitzlein, Minjie Shao and Ann Sherman

Journal of Financial Research, 2019, vol. 42, issue 1, 5-39

Abstract: We offer experimental and theoretical evidence that auction methods for initial public offerings (IPOs) in the United States may be improved through hybrids that include a separate retail tranche or “public pool.” The multi‐unit uniform price auctions in our laboratory experiments incorporate key IPO features including endogenous entry, costly information acquisition, and differing capacity constraints. As predicted, hybrids increase proceeds and reduce price volatility, price error, and the incentive for small bidders to free ride. Underpricing occurs in both treatments but is attenuated with the public pool. Our results imply that both IPO auctions and equity crowdfunding/crowdinvesting should include separate, non‐price‐setting tranches for the general public.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/jfir.12169

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:bla:jfnres:v:42:y:2019:i:1:p:5-39

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-2592

Access Statistics for this article

Journal of Financial Research is currently edited by Jayant Kale and Gerald Gay

More articles in Journal of Financial Research from Southern Finance Association Contact information at EDIRC., Southwestern Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().