The equilibrium prices of auction IPO securities: Empirical evidence

Alex Petkevich and Taufique Samdani

Journal of Financial Markets, 2022, vol. 57, issue C

Abstract: We empirically show that the auction IPO share price is the equilibrium outcome of a sequential game between promoters and institutional investors. In this game, promoters’ utility for information production and their utility for price stability are higher (lower) than their utility for IPO proceeds when they retain a large (small) fraction of the firm’s equity. Conversely, institutional investors always produce information and their utility for underpricing, which is inversely related to return volatility, is higher (lower) in lottery (pro-rata) IPOs. The findings provide new evidence on the economic roles of promoters and institutional investors in the auction IPO market.

Keywords: Auctions; Lotteries; IPOs; Underpricing; Promoters; Institutional investors (search for similar items in EconPapers)
JEL-codes: G14 G15 G32 M41 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:57:y:2022:i:c:s1386418121000112

DOI: 10.1016/j.finmar.2021.100629

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