Leaders and followers in hot IPO markets

Shantanu Banerjee, Ufuk Güçbilmez and Grzegorz Pawlina

Journal of Corporate Finance, 2016, vol. 37, issue C, 309-334

Abstract: We model the dynamics of going public within an IPO wave. The model predicts that firms with better growth opportunities can find it optimal to go public early and accept underpricing of their issues to signal quality. Data supports this prediction as, on average, early movers underprice their issues significantly more and we show that leaders (early movers with high underpricing) obtain much higher valuations when going public than other IPO firms. Furthermore, after going public, leaders invest significantly more, their sales grow faster, and their profitability remains higher compared to other IPO firms.

Keywords: IPO cycles; Underpricing; Adverse selection; Signaling (search for similar items in EconPapers)
JEL-codes: C72 D82 E32 G30 G32 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:37:y:2016:i:c:p:309-334

DOI: 10.1016/j.jcorpfin.2016.01.004

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